Nathan's Famous, Inc. (NATH) Bundle
Understanding Nathan's Famous, Inc. (NATH) Revenue Streams
Understanding Nathan's Famous, Inc. Revenue Streams
Primary Revenue Sources:
- Branded Products: $24,536,000 for the thirteen weeks ended September 29, 2024, up from $23,352,000 in the same period of 2023.
- Company-owned Restaurants: $5,348,000 for the thirteen weeks ended September 29, 2024, compared to $5,193,000 for the same period in 2023.
- License Royalties: $9,491,000 for the thirteen weeks ended September 29, 2024, an increase from $8,339,000 in 2023.
- Franchise Fees and Royalties: $1,174,000 for the thirteen weeks ended September 29, 2024, down from $1,291,000 in 2023.
- Advertising Fund Revenue: $560,000 for the thirteen weeks ended September 29, 2024, compared to $569,000 in 2023.
| Revenue Source | Q2 2024 Revenue | Q2 2023 Revenue | Year-Over-Year Change (%) |
|---|---|---|---|
| Branded Products | $24,536,000 | $23,352,000 | 5% |
| Company-owned Restaurants | $5,348,000 | $5,193,000 | 3% |
| License Royalties | $9,491,000 | $8,339,000 | 14% |
| Franchise Fees and Royalties | $1,174,000 | $1,291,000 | -9% |
| Advertising Fund Revenue | $560,000 | $569,000 | -2% |
Year-over-Year Revenue Growth Rate:
Total revenues for the thirteen weeks ended September 29, 2024, were $41,109,000, reflecting a 6% increase compared to $38,744,000 for the same period in 2023.
Total revenues for the twenty-six weeks ended September 29, 2024, were $85,876,000, up 6% from $80,729,000 in 2023.
Contribution of Different Business Segments:
- Branded Product Program: Contributed 60% of total revenues in Q2 2024.
- Company-owned Restaurants: Represented 13% of total revenues.
- License Royalties: Accounted for 23% of total revenues.
- Franchise Fees and Royalties: Made up 3% of total revenues.
- Advertising Fund Revenue: Contributed 1% of total revenues.
Significant Changes in Revenue Streams:
The license royalties segment saw a substantial increase of 14% year-over-year, driven by a 13% increase in royalties earned on hot dogs sold. Conversely, franchise fees and royalties decreased by 9%, indicating a potential decline in franchise performance or traffic at franchise locations.
A Deep Dive into Nathan's Famous, Inc. (NATH) Profitability
A Deep Dive into Nathan's Famous, Inc. Profitability
Gross Profit Margin: For the second quarter of fiscal 2025, the gross profit was $3,855,000, reflecting a gross profit margin of 13%, down from 15% in the second quarter of fiscal 2024. For the twenty-six weeks ended September 29, 2024, the gross profit was $8,959,000, maintaining a gross profit margin of 15%, consistent with the prior fiscal year period.
Operating Profit Margin: The income from operations for the second quarter fiscal 2025 was $9,632,000, yielding an operating profit margin of approximately 23.4%. This is an increase from $9,104,000, or 23.5% in the second quarter of fiscal 2024. For the twenty-six weeks ended September 29, 2024, income from operations was $23,377,000, representing an operating profit margin of 27.3%, compared to 20,567,000 and 25.5% for the same period last year.
Net Profit Margin: The net income for the second quarter of fiscal 2025 was $6,030,000, resulting in a net profit margin of 14.7%, compared to 14.7% in the second quarter of fiscal 2024. For the twenty-six weeks ended September 29, 2024, net income totaled $15,307,000, yielding a net profit margin of 17.8%, up from 16.2% in the previous year.
Trends in Profitability Over Time
Over the past two fiscal years, profitability metrics have shown a positive trend. The following table summarizes these trends:
| Metric | Q2 FY2025 | Q2 FY2024 | FY2025 (26 weeks) | FY2024 (26 weeks) |
|---|---|---|---|---|
| Gross Profit | $3,855,000 | $4,358,000 | $8,959,000 | $8,502,000 |
| Operating Income | $9,632,000 | $9,104,000 | $23,377,000 | $20,567,000 |
| Net Income | $6,030,000 | $5,711,000 | $15,307,000 | $13,099,000 |
Comparison of Profitability Ratios with Industry Averages
The company's profitability ratios are generally competitive within the industry. The average gross profit margin in the food service industry is typically around 15%, which aligns with the company's current gross profit margin of 15% for fiscal 2025. The operating profit margin in the industry averages approximately 20%, while the company has achieved a margin of 27.3%. Lastly, the net profit margin in the industry hovers around 10%, with the company's net profit margin reaching 17.8%.
Analysis of Operational Efficiency
The operational efficiency of the company can be evaluated through its cost management and gross margin trends. The cost of sales increased by approximately 8% to $26,029,000 in Q2 FY2025, compared to $24,187,000 in the previous year. Despite this increase, the company managed to maintain a relatively stable gross margin, demonstrating effective cost management strategies.
The cost of sales as a percentage of restaurant sales decreased from 53% to 51% year-over-year, indicating improved efficiency in managing food and paper costs. Labor costs have slightly increased, reflecting the impact of minimum wage increases.
The following table outlines key operational efficiency metrics:
| Metric | Q2 FY2025 | Q2 FY2024 |
|---|---|---|
| Cost of Sales (% of Sales) | 51% | 53% |
| Labor and Related Expenses (% of Sales) | 26.5% | 25.3% |
| Food and Paper Costs (% of Restaurant Sales) | 24.2% | 27.6% |
Debt vs. Equity: How Nathan's Famous, Inc. (NATH) Finances Its Growth
Debt vs. Equity: How Nathan's Famous, Inc. Finances Its Growth
Debt Levels Overview
As of September 29, 2024, the company reported total long-term debt of $57,187,000 and total current liabilities of $16,072,000. This indicates a significant reliance on debt financing to support its operations and growth initiatives.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 3.48, calculated by dividing total liabilities of $78,987,000 by total stockholders' equity (deficit) of ($21,284,000). This ratio is notably higher than the industry average of 1.5, suggesting a more aggressive use of debt in the company's capital structure.
Recent Debt Issuances and Refinancing Activity
On July 10, 2024, the company refinanced and redeemed its outstanding $60,000,000 principal amount of 2025 Notes, recording a loss on extinguishment of debt of $334,000. Interest expenses for the second quarter of fiscal 2025 were $1,441,000, which included $458,000 related to the 2025 Notes and $930,000 from the SOFR Term Loan borrowings.
Balancing Debt Financing and Equity Funding
The company has demonstrated a consistent strategy of balancing debt financing with equity funding. In the first half of fiscal 2025, dividends paid on common stock totaled $4,085,000, reflecting a commitment to return value to shareholders while managing debt obligations. As of September 29, 2024, cash and cash equivalents amounted to $31,207,000, indicating a healthy liquidity position to support its financing activities.
| Metric | Amount |
|---|---|
| Total Long-term Debt | $57,187,000 |
| Total Current Liabilities | $16,072,000 |
| Debt-to-Equity Ratio | 3.48 |
| 2025 Notes Redeemed | $60,000,000 |
| Loss on Debt Extinguishment | $334,000 |
| Interest Expense (Q2 FY2025) | $1,441,000 |
| Dividends Paid | $4,085,000 |
| Cash and Cash Equivalents | $31,207,000 |
Assessing Nathan's Famous, Inc. (NATH) Liquidity
Assessing Nathan's Famous, Inc. Liquidity
Current Ratio: The current ratio for Nathan's Famous, Inc. as of September 29, 2024, is 6.18. This is calculated by dividing current assets of $36,825,000 by current liabilities of $5,952,000.
Quick Ratio: The quick ratio is approximately 5.71, calculated by subtracting inventories of $1,500,000 from current assets and then dividing by current liabilities.
Working Capital Trends
As of September 29, 2024, Nathan's Famous reported net working capital of $32,618,000, an increase from $23,203,000 at March 31, 2024. This indicates a strengthening liquidity position.
Cash Flow Statements Overview
The cash flow from operating activities for the fiscal year 2025 is $14,826,000, compared to $11,366,000 in fiscal 2024. The cash flow from investing activities shows a slight outflow of ($130,000), while financing activities resulted in an outflow of ($4,516,000).
| Cash Flow Item | Fiscal 2025 (in thousands) | Fiscal 2024 (in thousands) |
|---|---|---|
| Net Cash Provided by Operating Activities | $14,826 | $11,366 |
| Net Cash Used in Investing Activities | ($130) | ($169) |
| Net Cash Used in Financing Activities | ($4,516) | ($4,080) |
| Net Increase in Cash and Cash Equivalents | $10,180 | $7,117 |
Liquidity Concerns or Strengths
Nathan's Famous demonstrates a strong liquidity position with a significant increase in cash and cash equivalents to $31,207,000 as of September 29, 2024, up from $21,027,000 at March 31, 2024. This increase supports their ability to meet short-term obligations effectively.
However, there are potential liquidity concerns due to the outflows in financing activities, which included payments on debt totaling $4,516,000 in the fiscal year 2025. Continued monitoring of cash flow trends will be necessary to ensure sustained financial health in the face of operational and market pressures.
Is Nathan's Famous, Inc. (NATH) Overvalued or Undervalued?
Valuation Analysis
To assess whether Nathan's Famous, Inc. is overvalued or undervalued, we examine key financial metrics including price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 19.87, calculated based on a trailing twelve months (TTM) earnings of $15,307,000 and a market capitalization of approximately $303,000,000.
Price-to-Book (P/B) Ratio
The P/B ratio is 4.76, derived from a book value of equity of $63,353,000 against the total shares outstanding of 9,374,130 as of September 29, 2024.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 12.70, using an enterprise value of approximately $368,000,000 and EBITDA of $28,000,000 for the last twelve months.
Stock Price Trends
Over the last 12 months, the stock price has shown a steady increase from $60.00 to approximately $74.00, reflecting a growth of 23.33%.
Dividend Yield and Payout Ratios
The current dividend yield is 2.69%, based on an annual dividend of $2.00 per share. The payout ratio is approximately 53.33%, calculated from net income of $15,307,000.
Analyst Consensus
The consensus among analysts is a "Hold" rating, with a target price forecast of $75.00, indicating limited upside potential from the current price.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 19.87 |
| P/B Ratio | 4.76 |
| EV/EBITDA Ratio | 12.70 |
| Stock Price (12 months ago) | $60.00 |
| Current Stock Price | $74.00 |
| Dividend Yield | 2.69% |
| Payout Ratio | 53.33% |
| Analyst Consensus | Hold |
Key Risks Facing Nathan's Famous, Inc. (NATH)
Key Risks Facing Nathan's Famous, Inc.
Overview of Internal and External Risks:
Nathan's Famous, Inc. faces several risks that could impact its financial health. These include:
- Industry Competition: The food service industry is highly competitive, with numerous players vying for market share. In fiscal 2025, franchise restaurant sales decreased to $36,334,000 compared to $36,433,000 in fiscal 2024, reflecting challenges in maintaining customer traffic at both domestic and international locations.
- Regulatory Changes: Changes in food safety regulations and labor laws, including minimum wage increases, pose operational risks. Labor expenses as a percentage of restaurant sales rose to 27.4% in fiscal 2025 from 27.1% in fiscal 2024.
- Market Conditions: Economic downturns can lead to reduced consumer spending. The company reported lower traffic at international locations and entertainment venues, adversely affecting sales.
Operational, Financial, or Strategic Risks:
Recent earnings reports highlight several operational and financial risks:
- Commodity Price Fluctuations: The average cost per pound of hot dogs increased by 5% in fiscal 2025 due to inflationary pressures and supply chain issues. If the cost of beef rises further, the company may struggle to pass these costs onto consumers, adversely impacting profit margins.
- Franchise Performance: Franchise fees and royalties decreased by approximately 5% to $2,247,000 in fiscal 2025 compared to $2,366,000 in fiscal 2024. This decline indicates potential challenges in franchisee performance and profitability.
- Debt Obligations: Interest expense for the second quarter of fiscal 2025 was $1,441,000, reflecting ongoing debt obligations. The company’s refinancing of its debt in July 2024 resulted in a loss on extinguishment of debt amounting to $334,000.
Mitigation Strategies:
The company has implemented several strategies to mitigate risks:
- Cost Management: The company is focused on controlling costs, with food and paper costs as a percentage of restaurant sales decreasing from 27.8% to 24.8% in fiscal 2025.
- Debt Management: The refinancing of debt is part of a strategy to lower interest costs and manage cash flow effectively.
- Franchise Support: The company continues to provide support to franchisees to enhance performance and drive sales.
| Risk Factor | Impact | Financial Data |
|---|---|---|
| Commodity Price Fluctuations | Increased cost of sales | Cost of sales increased by 5% to $51,270,000 in fiscal 2025. |
| Franchise Performance | Decline in royalty income | Franchise fees decreased to $2,247,000 in fiscal 2025. |
| Debt Obligations | Higher interest expenses | Interest expense of $1,441,000 in Q2 fiscal 2025. |
Future Growth Prospects for Nathan's Famous, Inc. (NATH)
Future Growth Prospects for Nathan's Famous, Inc.
Analysis of Key Growth Drivers
The company is poised for growth through several key drivers:
- Product Innovations: The Branded Product Program saw foodservice sales increase by approximately 4% to $50,682,000 for the fiscal 2025 period compared to $48,522,000 for fiscal 2024 .
- Market Expansions: The total number of franchised locations increased to 243 at September 29, 2024, up from 235 at September 24, 2023 .
- Acquisitions: The company has not disclosed any recent acquisitions but continues to evaluate opportunities that align with its growth strategy.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal 2025 period, revenues increased by approximately 6% to $85,876,000 compared to $80,729,000 in the fiscal 2024 period . Future earnings estimates indicate:
| Fiscal Year | Revenue Projection | Earnings Estimate |
|---|---|---|
| 2025 | $85,876,000 | $15,307,000 |
| 2026 | Projected Increase of 5% | Estimated Growth to $16,000,000 |
Strategic Initiatives or Partnerships
The company is focusing on strategic partnerships, especially in licensing agreements. License royalties increased by approximately 12% to $22,412,000 in the fiscal 2025 period compared to $19,997,000 in the fiscal 2024 period . This emphasizes the importance of partnerships in driving revenue growth.
Competitive Advantages
Several competitive advantages position the company favorably for future growth:
- Brand Recognition: The brand's long-standing presence in the market enhances customer loyalty and franchise interest.
- Diverse Revenue Streams: The company generates income through multiple channels, including franchise fees, product sales, and licensing, contributing to a stable revenue base.
- Operational Efficiency: The cost of sales as a percentage of restaurant sales improved to 52% in the fiscal 2025 period compared to 55% in fiscal 2024 .
Financial Summary
Key financial metrics reflecting the company's growth potential include:
| Metric | Value (Fiscal 2025) |
|---|---|
| Total Revenues | $85,876,000 |
| Net Income | $15,307,000 |
| Adjusted EBITDA | $24,631,000 |
| Gross Profit Margin | 15% |
Nathan's Famous, Inc. (NATH) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- Nathan's Famous, Inc. (NATH) Financial Statements – Access the full quarterly financial statements for Q2 2024 to get an in-depth view of Nathan's Famous, Inc. (NATH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Nathan's Famous, Inc. (NATH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.