The analysts following Cracker Barrel Old Country Store have been busy of late hiking their numbers following the company's strong earnings report last month. The latest is John Staszak at Argus Research, who on Tuesday lifted his price target for the Lebanon-based restaurant and retail chain (Ticker: CBRL) to $88 from $78. But Rich Smith at The Motley Fool thinks the Street and investors are getting ahead of themselves a bit.
I was a bit ambivalent when Miller Tabak endorsed Cracker Barrel last week, because at 15.7 times earnings, but only 10% projected long-term earnings growth, the stock looked overvalued to me. Today, Argus is both arguing for a higher price target ($88 versus $81) and saying Cracker Barrel will get there from a higher starting point (16.3 times earnings versus 15.7). Needless to say, Argus is setting itself a higher hurdle on this one, and one more difficult to clear.
You would have to live under a rock not to have noticed the damage the recession has had on Americans, and we're cutting back on everything we can. So it should be no surprise that deep-discount retailers are having a heyday as consumers trade down to lower-cost items. But to really see why dollar stores are doing so well, look at the first chart in Morgan Housel's analysis of unemployment found here. Those who make the least are struggling the most, making it a natural that the lowest-cost retailers are picking up business.
The irony of the trend toward dollar stores is that margins can be higher at dollar stores than they are at grocery stores or discount retailers. Family Dollar, Dollar Tree, and Dollar General all have higher operating and profit margins than Wal-Mart (NYSE: WMT ) , one of the best retailers in the world ,and well below the low single-digit margins grocery stores usually have.
Dollar General shares were changing hands for $51.05 as o about 1 p.m. CDT, up about 1 percent on the day.
Rich Smith at the Motley Fool has chimed in on the upgrade Friday by Argus Research's John Staszak of Cracker Barrel Old Country Store shares. The move might seem aggressive, Smith writes, but couple Cracker Barrel's dividend yield to its free cash flow and Staszak's $72 price target "might even be conservative."
Savvy investors shouldn't be so concerned with the bottom line in a company's earnings report as with their cash flow statement. That's according to The Motley Fool, which dissects some of the recent quarterly numbers from Franklin-based Healthways (which reports earnings after markets close today) to point out why the company's earnings "aren't so hot." Read it at this link.