BRINKER INTERNATIONAL INC (NYSE:EAT) was flagged by our Decent Value screener as a stock with attractive valuation metrics while maintaining solid fundamentals. The company, which operates Chili’s Grill & Bar and Maggiano’s Little Italy, shows a combination of reasonable growth, profitability, and financial health—all at a price that suggests potential undervaluation.
Valuation – Priced Below Peers
EAT’s valuation stands out with a ChartMill Valuation Rating of 7/10, indicating it trades at a discount relative to its industry and broader market. Key points:
- P/E Ratio (20.11) is below the industry average (35.46) and the S&P 500 (27.53).
- Forward P/E (16.23) is significantly cheaper than both the sector (98.70) and the market (36.71).
- Enterprise Value/EBITDA and Price/Free Cash Flow ratios also suggest EAT is priced more attractively than most competitors.
Profitability – Strong Returns Despite Margin Pressures
With a Profitability Rating of 6/10, EAT demonstrates solid earnings power:
- Return on Equity (128.61%) and Return on Invested Capital (20.59%) rank near the top of its industry.
- Profit Margin (6.49%) is above average, though gross margins (17.64%) remain a weak spot due to rising costs.
- Recent earnings growth (+105.64% YoY) highlights improving operational efficiency.
Financial Health – Stable but with Some Risks
EAT’s Health Rating of 5/10 reflects a mixed picture:
- Altman-Z Score (4.31) signals low bankruptcy risk, outperforming 85% of peers.
- Debt/FCF (1.38) is strong, meaning debt could be repaid quickly from free cash flow.
- However, high Debt/Equity (2.00) and weak Current Ratio (0.28) indicate reliance on external financing and short-term liquidity concerns.
Growth – Earnings Momentum Ahead
The Growth Rating of 5/10 points to steady expansion:
- EPS is expected to grow 39.19% annually over the next few years.
- Revenue growth (+19.80% YoY) has been robust, though future projections are more modest (+0.34% annually).
Conclusion
EAT presents a compelling case for value investors: it trades at a discount despite strong profitability and improving earnings. While liquidity and debt levels warrant monitoring, the stock’s valuation and growth potential make it worth further research.
For more undervalued stocks with solid fundamentals, explore our Decent Value screener.
Review the full fundamental analysis of EAT for deeper insights.
Disclaimer
This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.
