About Dine Brands Global

The restaurant industry as a whole has seen its fair share of consolidation. 

From McDonald’s investing in Chipotle in the late ‘90s (and subsequently divesting) and Yum! Brands owning iconic fast-food brands such as Kentucky Fried Chicken (KFC), Pizza Hut, Taco Bell and others to Restaurant Brands International, which is home to Burger King, Tim Hortons, Popeyes and Firehouse Subs, it’s makes sense that other slightly higher-priced dining establishments and brands have also been growing nonorganically through acquisitions.

Dine Brands Global is a prime example of this phenomenon, as the dining conglomerate is home to Applebee’s and IHOP.

Although the restaurant industry was hit hard by the onset and persistence of the COVID-19 pandemic, companies such as Applebee’s and IHOP had strategic third-party delivery partnerships in place that allowed Dine Brands to still receive and fill orders and subsequently customer’s stomachs.

Although we weren’t necessarily surprised that Dine had these partnerships in place, we were pleased to find that the company’s executive team(s) have been proactive and up on the latest consumer dining trends while skirting (as much as they could and still can) COVID-19 restrictions, legally, of course.

Given that this company has seemingly done a lot of good work in recent history and that IHOP’s pancakes smack as the cool kids say and Applebee’s’ burgers are delish (again, as the cool kids say), we figured it would be an apt opportunity to delve into the company’s financials and try to figure out whether or not the parent’s stock is worth investing in.

Let’s get to know Dine Brand’s a little better.

Dine Brands Global’s stock financials

The company’s share price is currently trading at around $71, maintaining a market capitalization of $1.1 billion, a price-to-earnings (P/E) ratio of almost 14 all while shelling out an annual dividend of $2.04 to its shareholders.

Thankfully, this is far from a bad start as Dine’s stock appears to be modestly undervalued relative to what its actually worth, as displayed by its current P/E ratio being less than 20, which generally indicates that a stock is trading at fair value or what it’s worth paying for today.

Additionally, we like that despite a global health pandemic, labor and other cost-related challenges the company has and is working on overcoming, the company is still providing shareholders with a healthy dividend yielding nearly 3% annually.

We’ll dig deeper into Dine’s financials and gain a better idea of whether or not the company can afford to keep paying out this dividend.

On the company’s balance sheet, Dine holds nearly $2 billion in total assets along with approximately $2.2 billion in total liabilities.

We’ve analyzed very few companies that have more total liabilities than total assets on their books, however it’s not all that shocking that Dine’s balance sheet is the way it is.

Big or small restaurant, the industry norm is littered with low margins, lots of waste, regulations, expenses, fluctuating costs and much more. 

Going into the restaurant business from scratch sounds like a complete nightmare, however it’s not as bad if you have over 3,400 restaurants scattered in and around 16 countries.

Nevertheless, the point is that not even the big, established players are immune to large amounts of debt to manage.

However, given that the company’s total liabilities are not by any means substantially greater than its total assets paired with its relative scale, market share and global footprint, we’re not fearful that Dine won’t be able to hew down its debt over time, especially as COVID-19 restrictions continue to hopefully ease and subside.

As it relates to the conglomerate’s total revenue over the last five years, it’s been somewhat unexciting as expected, standing at $732 million in 2017, extending to $896 million in 2021, generally staying within this range between all five years.

Nevertheless, for a company as mature and large scale as Dine, we’re not by any means bummed that its revenue has stayed fairly stable, especially during the past five years as the restaurant industry has been, as previously mentioned, plagued with challenges.

Speaking of challenges as we leap over to the company’s cash flow statement, the company experienced substantially negative net income in 2017 and 2020 when net income stood at roughly -$342 million and -$103 million, respectively.

Both of these significant losses can likely be attributed to COVID-19 along with supply chain and labor-related challenges and as previously alluded to, simply comes with the territory in the restaurant industry.

If the company’s net income figures were that bad each of the last five years, we’d be gravely concerned, however the company reported relatively strong positive net income numbers in 2018, 2019 and 2021, which keeps our team generally at ease.

Dine Brands Global’s stock fundamentals

What also keeps us at ease is the fact that Dine’s trailing twelve month (TTM) net profit margin is around 4% higher than the industry average. 

As mentioned in previous articles, scoring a strong profit margin in the restaurant space is not easy to accomplish.

At all.

Thankfully, Dine’s TTM net profit margin stands at nearly 10% to the industry’s 5.4%, according to TD Ameritrade’s platform, which is likely a byproduct of holding a material amount of market share in the in-person restaurant and dining sector.

Sadly, as expected the company’s TTM returns on assets and investment are a bit lower than the industry averages, but Applebee’s and IHOP (both subsidiaries of Dine) have a lot of restaurants and assets that will likely appreciate as time rolls on. Given the nature of the industry (yes, we keep harping on this but it’s important) we’re not overly concerned with the company’s lackluster core return metrics. We think they’ll inch closer and closer to the industry’s average in the coming years, as most huge companies do.

Should you buy Dine Brands Global’s stock?

Dine Brands has a lot of restaurants and overall solid (not great, not terrible) financials.

No matter how much we like eating a stack of pancakes at IHOP or scarfing down Applebee’s 2 for $20, the numbers matter and the more of our opinion(s) we inject or let potentially cloud our objective views of the company’s financials, the worse off we are as critical, objective thinkers and investors.

That being said, given the financials and the aforementioned information, we still deem it appropriate to give Dine Brands a “buy” rating.

DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.