Macroaxis Stories

Should you hold on to your FAT Brands position?

July 25, 2023  By Raphi Shpitalnik
Macroaxis Story
FAT Brands (NASDAQ: FAT) has been making waves in the Consumer Cyclical sector, specifically within the Hotels, Restaurants & Leisure industry. Despite a challenging year, the company has shown resilience with a quarterly revenue growth of 8.5%, generating a gross profit of $141M. However, it's worth noting that the company reported a loss in diluted EPS of 7.98 and an estimated loss of 3.8 for next year's EPS. The change to net income stands at a significant $78.8M. On the other hand, FAT Brands boasts an impressive enterprise value of $1.4B. The stock's day typical price is 6.89, slightly above its valuation real value of 11.12. Despite the negative price action indicator of -0.09, Wall Street's target price for the stock is an optimistic 25. With a dividend yield of 0.0806, it may be time to consider strengthening your position in FAT Brands. The company's robust performance amidst industry challenges indicates potential for future growth. As more conservative investors are venturing into the hotels, restaurants, and leisure space, FAT Brands could be on your radar. Why do we maintain confidence in the hope for a swift recovery? This article aims to highlight some fundamental factors affecting FAT Brands' products and services. Furthermore, I will also reveal how these factors may influence the investment outlook for FAT Brands in August.
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Reviewed by Rifka Kats

FAT Brands Inc., a prominent player in the restaurant industry, has seen some turbulence in its financial performance. The company reported a net loss of $126.2 million and a negative net interest income of $94.8 million. Despite these setbacks, FAT Brands' revenue per share stands at a promising $25.18, hinting at a potential recovery. However, the diluted EPS is reported at a concerning -7.98, which could impact investor confidence. On a brighter note, the company's risk-adjusted performance stands at 0.0541, suggesting that the company is capable of delivering returns while managing risk. The current quote for FAT Brands stock is $6.85, which is significantly lower than Wall Street's target price of $25. Considering these factors, it might be time to consider strengthening your position in FAT Brands stock, especially if you believe in the company's potential to bounce back from its current financial woes.

A deeper look at FAT

Approximately 73.0% of the company's shares are held by insiders of FAT Brands. The insider ownership of FAT Brands pertains to the portion of the company's equity owned by its officers, directors, relatives of the leadership team, or any individual who has access to confidential information before it is released to the public. For our latest analysis of FAT, including its current ownership diagnostics, please check out our most recent report.
The performance of FAT Brands in the marketplace will significantly impact your decision to invest in its stock. Revenue growth, profitability, competitive positioning, management quality, and industry trends can influence FAT Brands' stock prices. When investing in FAT Brands, there are several factors to consider and potential outcomes to expect. As a company performs well, its stock price may increase, allowing investors to benefit from price appreciation. However, FAT Stock can experience significant price fluctuations due to market conditions, economic factors, industry trends, or company-specific news. This is why investing in stocks such as FAT Brands carries risks, including the potential for capital loss. Stock prices can decline, and investors may incur losses if they sell shares at a lower price than their initial investment.

How important is FAT Brands's Liquidity

FAT Brands financial leverage refers to using borrowed capital as a funding source to finance FAT Brands ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. FAT Brands financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to FAT Brands' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of FAT Brands' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between FAT Brands's total debt and its cash.

How does FAT utilize its cash?

At this time, FAT Brands' Total Cash From Operating Activities is comparatively stable compared to the past year. . To perform a cash flow analysis of FAT Brands, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash FAT Brands is receiving and how much cash it distributes out in a given period. The FAT Brands cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.

FAT Brands Gross Profit

FAT Brands Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing FAT Brands previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show FAT Brands Gross Profit growth over the last 10 years. Please check FAT Brands' gross profit and other fundamental indicators for more details.

Breaking down FAT Brands Indicators

FAT Brands holds a total of fifteen million four hundred sixty-one thousand eight hundred outstanding shares. FAT Brands shows majority of its outstanding shares owned by insiders. An insider is usually defined as a corporate executive, director, member of the board or institutional investors. class="underlinedLink" href="/invest/ratio/FAT/Shares-Owned-by-Institutions">institutional investor who own at least 10% of the company's outstanding shares. 72.89 percent of FAT Brands outstanding shares that are owned by insiders denotes they have been buying or selling the stock in recent months in anticipation of some upcoming event. Please note that no matter how much assets the company secures, if the real value of the entity is less than the current market value, you may not be able to make money on it.

Ownership Breakdown

Retail Investors
20.64%		Insiders
72.89%		Institutions
6.47%
Retail Investors20.64
Insiders72.89
Institutions6.47
FAT Brands Inc, a prominent player in the Consumer Discretionary sector, specifically in the Restaurants industry, has been making waves in the NASDAQ exchange under the code FAT. With a market capitalization of 116.61M and an enterprise value of 1.4B, the company has been demonstrating a strong financial position.
Despite a negative earnings per share of 7.98, indicating a loss, the company has shown promising signs of growth with a quarterly revenue growth of 0.085. The company's total asset stands at 1.21B, with net assets also at 1.21B, demonstrating a strong balance sheet. However, the company's current ratio of 0.41X indicates a potential liquidity risk. This is further underscored by the company's high total debt of 1.12B and a probability of bankruptcy standing at 52.48%. In terms of ownership, institutions hold 6.47% of the shares, while insiders hold a significant 72.89%. The company's short ratio stands at 1.43X with 58.42K shares shorted, indicating a moderate level of short interest. Despite the challenges, FAT Brands Inc has shown resilience with a quarterly earnings growth of 112.056. As the company continues to navigate the market, investors may want to consider strengthening their position in FAT Brands stock. .

Is FAT showing indication of lower volatility?

FAT Brands Inc. (FAT), renowned for its diverse portfolio of restaurant brands, is exhibiting indications of potentially reduced volatility. The downside deviation, a measure of risk, has recently declined to 3.14, suggesting a possible decrease in volatility. This reduction in downside deviation implies that the stock's returns could be less scattered, indicating a more predictable performance. Investors seeking less risk may find this an opportune moment to consider incorporating FAT Brands into their portfolio. Despite this, FAT Brands displays above-average downside volatility for the selected time horizon. We recommend investors to further scrutinize FAT Brands and ensure that all market timing and asset allocation strategies align with the projected future alpha of FAT Brands. Understanding varying market volatility trends often assists investors in timing the market. The correct use of volatility indicators allows traders to gauge FAT Brands' stock risk against market volatility during both bullish and bearish trends.
The heightened level of volatility that accompanies bear markets can directly influence FAT Brands' stock price, adding stress to investors as they witness the value of their shares plummet. This typically compels investors to rebalance their portfolios by purchasing different stocks as prices decline. In conclusion, FAT Brands (FAT) appears to be an intriguing investment opportunity. The stock has been given a 'Strong Buy' consensus by the single analyst covering it, who has set a target price estimated value of $25, a significant upside from the current market valuation of $6.85. This suggests a possible upside price of $10.9. However, investors should also consider the possible downside price of $4.37. The company's real value is estimated at $11.12, which is higher than both the market value and the hype value of $6.87. As we approach the fiscal year end in December, it will be interesting to see how the company's financials shape up. .

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Editorial Staff

Raphi Shpitalnik is a Junior Member of Macroaxis Editorial Board. Raphael is a young entrepreneur who joined Macroaxis on a part-time basis at the beginning of the pandemic and eventually acquired a real taste for investing and fintech. He likes to analyze different equity instruments across a wide range of industries, focusing primarily on consumer products, sports, fintech, cannabis, and AI. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Raphi Shpitalnik do not own shares of FAT Brands. Please refer to our Terms of Use for any information regarding our disclosure principles.

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