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FRANCHISE GROUP INC (FRG) Stock Fundamental Analysis

NASDAQ:FRG - Nasdaq - US35180X1054 - Common Stock - Currency: USD

29.88  +0.03 (+0.1%)

After market: 29.94 +0.06 (+0.2%)

Fundamental Rating

3

FRG gets a fundamental rating of 3 out of 10. The analysis compared the fundamentals against 120 industry peers in the Specialty Retail industry. Both the profitability and financial health of FRG have multiple concerns. FRG is not valued too expensively and it also shows a decent growth rate.


Dividend Valuation Growth Profitability Health

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2

1. Profitability

1.1 Basic Checks

FRG had positive earnings in the past year.
FRG had a positive operating cash flow in the past year.
The reported net income has been mixed in the past 5 years: FRG reported negative net income in multiple years.
FRG had a positive operating cash flow in 4 of the past 5 years.
FRG Yearly Net Income VS EBIT VS OCF VS FCFFRG Yearly Net Income VS EBIT VS OCF VS FCFYearly Net Income VS EBIT VS OCF VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 0 100M 200M 300M

1.2 Ratios

FRG has negative profitability rations, so we won't be analyzing them here.
FRG has a Return On Invested Capital of 4.68%. This is comparable to the rest of the industry: FRG outperforms 54.55% of its industry peers.
Measured over the past 3 years, the Average Return On Invested Capital for FRG is significantly below the industry average of 13.34%.
Industry RankSector Rank
ROA N/A
ROE N/A
ROIC 4.68%
ROA(3y)N/A
ROA(5y)N/A
ROE(3y)N/A
ROE(5y)N/A
ROIC(3y)7.05%
ROIC(5y)7.75%
FRG Yearly ROA, ROE, ROICFRG Yearly ROA, ROE, ROICYearly ROA, ROE, ROIC 2015 2016 2017 2018 2019 2020 2021 2022 0 20 40

1.3 Margins

The Operating Margin of FRG (3.57%) is comparable to the rest of the industry.
FRG's Operating Margin has declined in the last couple of years.
FRG has a better Gross Margin (39.81%) than 62.88% of its industry peers.
FRG's Gross Margin has declined in the last couple of years.
Industry RankSector Rank
OM 3.57%
PM (TTM) N/A
GM 39.81%
OM growth 3Y-4.9%
OM growth 5Y-15.6%
PM growth 3YN/A
PM growth 5YN/A
GM growth 3Y-6.31%
GM growth 5YN/A
FRG Yearly Profit, Operating, Gross MarginsFRG Yearly Profit, Operating, Gross MarginsYearly Profit, Operating, Gross Margins 2015 2016 2017 2018 2019 2020 2021 2022 0 10 20 30 40 50

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1

2. Health

2.1 Basic Checks

The Return on Invested Capital (ROIC) is below the Cost of Capital (WACC), so FRG is destroying value.
FRG has less shares outstanding than it did 1 year ago.
FRG has a worse debt/assets ratio than last year.
FRG Yearly Shares OutstandingFRG Yearly Shares OutstandingYearly Shares Outstanding 2015 2016 2017 2018 2019 2020 2021 2022 10M 20M 30M 40M
FRG Yearly Total Debt VS Total AssetsFRG Yearly Total Debt VS Total AssetsYearly Total Debt VS Total Assets 2015 2016 2017 2018 2019 2020 2021 2022 1B 2B 3B

2.2 Solvency

Based on the Altman-Z score of 1.63, we must say that FRG is in the distress zone and has some risk of bankruptcy.
Looking at the Altman-Z score, with a value of 1.63, FRG is doing worse than 65.91% of the companies in the same industry.
FRG has a Debt/Equity ratio of 6.97. This is a high value indicating a heavy dependency on external financing.
The Debt to Equity ratio of FRG (6.97) is worse than 80.30% of its industry peers.
Industry RankSector Rank
Debt/Equity 6.97
Debt/FCF N/A
Altman-Z 1.63
ROIC/WACC0.63
WACC7.39%
FRG Yearly LT Debt VS Equity VS FCFFRG Yearly LT Debt VS Equity VS FCFYearly LT Debt VS Equity VS FCF 2015 2016 2017 2018 2019 2020 2021 2022 0 500M 1B

2.3 Liquidity

A Current Ratio of 1.37 indicates that FRG should not have too much problems paying its short term obligations.
Looking at the Current ratio, with a value of 1.37, FRG is in line with its industry, outperforming 44.70% of the companies in the same industry.
A Quick Ratio of 0.60 indicates that FRG may have some problems paying its short term obligations.
FRG has a Quick ratio of 0.60. This is comparable to the rest of the industry: FRG outperforms 50.76% of its industry peers.
Industry RankSector Rank
Current Ratio 1.37
Quick Ratio 0.6
FRG Yearly Current Assets VS Current LiabilitesFRG Yearly Current Assets VS Current LiabilitesYearly Current Assets VS Current Liabilites 2015 2016 2017 2018 2019 2020 2021 2022 500M 1B

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4

3. Growth

3.1 Past

FRG shows a slight negative growth in Earnings Per Share. In the last year, the EPS has decreased by -6.32%.
The Revenue has been growing slightly by 7.73% in the past year.
The Revenue has been growing by 90.78% on average over the past years. This is a very strong growth!
EPS 1Y (TTM)-6.32%
EPS 3YN/A
EPS 5YN/A
EPS Q2Q%-259.25%
Revenue 1Y (TTM)7.73%
Revenue growth 3Y221.37%
Revenue growth 5Y90.78%
Sales Q2Q%-5.14%

3.2 Future

The Earnings Per Share is expected to grow by 11.08% on average over the next years. This is quite good.
The Revenue is expected to grow by 3.12% on average over the next years.
EPS Next Y-49.12%
EPS Next 2Y-5.22%
EPS Next 3Y-8.96%
EPS Next 5Y11.08%
Revenue Next Year0.34%
Revenue Next 2Y1.48%
Revenue Next 3Y2.42%
Revenue Next 5Y3.12%

3.3 Evolution

The Revenue growth rate is decreasing: in the next years the growth will be less than in the last years.
FRG Yearly Revenue VS EstimatesFRG Yearly Revenue VS EstimatesYearly Revenue VS Estimates 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 1B 2B 3B 4B 5B
FRG Yearly EPS VS EstimatesFRG Yearly EPS VS EstimatesYearly EPS VS Estimates 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2 4 6

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4

4. Valuation

4.1 Price/Earnings Ratio

With a Price/Earnings ratio of 8.39, the valuation of FRG can be described as very reasonable.
Compared to the rest of the industry, the Price/Earnings ratio of FRG indicates a somewhat cheap valuation: FRG is cheaper than 76.52% of the companies listed in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 26.52, FRG is valued rather cheaply.
With a Price/Forward Earnings ratio of 9.34, the valuation of FRG can be described as very reasonable.
Based on the Price/Forward Earnings ratio, FRG is valued a bit cheaper than the industry average as 72.73% of the companies are valued more expensively.
Compared to an average S&P500 Price/Forward Earnings ratio of 22.25, FRG is valued rather cheaply.
Industry RankSector Rank
PE 8.39
Fwd PE 9.34
FRG Price Earnings VS Forward Price EarningsFRG Price Earnings VS Forward Price Earnings ChartPrice Earnings - Forward Price Earnings PE FPE 10 20 30 40 50

4.2 Price Multiples

Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of FRG is on the same level as its industry peers.
Industry RankSector Rank
P/FCF N/A
EV/EBITDA 11.9
FRG Per share dataFRG EPS, Sales, OCF, FCF, BookValue per sharePer Share Data Per Share 0 50 100

4.3 Compensation for Growth

FRG's earnings are expected to decrease with -8.96% in the coming years. This may justify a cheaper valuation.
PEG (NY)N/A
PEG (5Y)N/A
EPS Next 2Y-5.22%
EPS Next 3Y-8.96%

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6

5. Dividend

5.1 Amount

With a Yearly Dividend Yield of 8.37%, FRG is a good candidate for dividend investing.
Compared to an average industry Dividend Yield of 5.22, FRG pays a better dividend. On top of this FRG pays more dividend than 96.21% of the companies listed in the same industry.
Compared to an average S&P500 Dividend Yield of 2.39, FRG pays a better dividend.
Industry RankSector Rank
Dividend Yield 8.37%

5.2 History

On average, the dividend of FRG grows each year by 33.91%, which is quite nice.
FRG has been paying a dividend for over 5 years, so it has already some track record.
FRG has not decreased its dividend in the last 3 years.
Dividend Growth(5Y)33.91%
Div Incr Years3
Div Non Decr Years3
FRG Yearly Dividends per shareFRG Yearly Dividends per shareYearly Dividends per share 2019 2020 2021 2022 2023 0.5 1 1.5 2 2.5

5.3 Sustainability

FRG has negative earnings and hence a negative payout ratio. The dividend may be in danger.
The dividend of FRG is growing, but the earnings are growing slower. This means the dividend growth is not sustainable.
DP-36.91%
EPS Next 2Y-5.22%
EPS Next 3Y-8.96%
FRG Yearly Income VS Free CF VS DividendFRG Yearly Income VS Free CF VS DividendYearly Income VS Free CF VS Dividend 2015 2016 2017 2018 2019 2020 2021 2022 0 100M 200M 300M

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FRANCHISE GROUP INC

NASDAQ:FRG (8/18/2023, 8:00:00 PM)

After market: 29.94 +0.06 (+0.2%)

29.88

+0.03 (+0.1%)

Chartmill FA Rating
GICS SectorConsumer Discretionary
GICS IndustryGroupConsumer Discretionary Distribution & Retail
GICS IndustrySpecialty Retail
Earnings (Last)08-02 2023-08-02/amc
Earnings (Next)11-01 2023-11-01/amc
Inst Owners0.05%
Inst Owner Change0%
Ins Owners25.23%
Ins Owner Change0%
Market Cap1.05B
Analysts75
Price Target31.88 (6.69%)
Short Float %N/A
Short RatioN/A
Dividend
Industry RankSector Rank
Dividend Yield 8.37%
Yearly Dividend2.97
Dividend Growth(5Y)33.91%
DP-36.91%
Div Incr Years3
Div Non Decr Years3
Ex-DateN/A
Surprises & Revisions
EPS beat(2)0
Avg EPS beat(2)-79.29%
Min EPS beat(2)-79.29%
Max EPS beat(2)-79.29%
EPS beat(4)1
Avg EPS beat(4)9.9%
Min EPS beat(4)-79.29%
Max EPS beat(4)126.71%
EPS beat(8)N/A
Avg EPS beat(8)N/A
EPS beat(12)N/A
Avg EPS beat(12)N/A
EPS beat(16)N/A
Avg EPS beat(16)N/A
Revenue beat(2)0
Avg Revenue beat(2)-3.29%
Min Revenue beat(2)-5.66%
Max Revenue beat(2)-0.91%
Revenue beat(4)2
Avg Revenue beat(4)0.48%
Min Revenue beat(4)-5.66%
Max Revenue beat(4)6.78%
Revenue beat(8)N/A
Avg Revenue beat(8)N/A
Revenue beat(12)N/A
Avg Revenue beat(12)N/A
Revenue beat(16)N/A
Avg Revenue beat(16)N/A
PT rev (1m)0%
PT rev (3m)-15.08%
EPS NQ rev (1m)0%
EPS NQ rev (3m)10.03%
EPS NY rev (1m)0%
EPS NY rev (3m)-36.74%
Revenue NQ rev (1m)0%
Revenue NQ rev (3m)0%
Revenue NY rev (1m)0%
Revenue NY rev (3m)-2.08%
Valuation
Industry RankSector Rank
PE 8.39
Fwd PE 9.34
P/S 0.24
P/FCF N/A
P/OCF 20.26
P/B 4.66
P/tB N/A
EV/EBITDA 11.9
EPS(TTM)3.56
EY11.91%
EPS(NY)3.2
Fwd EY10.7%
FCF(TTM)-0.26
FCFYN/A
OCF(TTM)1.47
OCFY4.93%
SpS122.5
BVpS6.41
TBVpS-21.94
PEG (NY)N/A
PEG (5Y)N/A
Profitability
Industry RankSector Rank
ROA N/A
ROE N/A
ROCE N/A
ROIC 4.68%
ROICexc 4.88%
ROICexgc 8.15%
OM 3.57%
PM (TTM) N/A
GM 39.81%
FCFM N/A
ROA(3y)N/A
ROA(5y)N/A
ROE(3y)N/A
ROE(5y)N/A
ROIC(3y)7.05%
ROIC(5y)7.75%
ROICexc(3y)7.65%
ROICexc(5y)8.86%
ROICexgc(3y)13.98%
ROICexgc(5y)14.48%
ROCE(3y)N/A
ROCE(5y)N/A
ROICexcg growth 3Y5.57%
ROICexcg growth 5Y-5.77%
ROICexc growth 3Y-0.91%
ROICexc growth 5Y-10.96%
OM growth 3Y-4.9%
OM growth 5Y-15.6%
PM growth 3YN/A
PM growth 5YN/A
GM growth 3Y-6.31%
GM growth 5YN/A
F-Score3
Asset Turnover1.21
Health
Industry RankSector Rank
Debt/Equity 6.97
Debt/FCF N/A
Debt/EBITDA 6.51
Cap/Depr 69.71%
Cap/Sales N/A
Interest Coverage N/A
Cash Conversion N/A
Profit Quality N/A
Current Ratio 1.37
Quick Ratio 0.6
Altman-Z 1.63
F-Score3
WACC7.39%
ROIC/WACC0.63
Cap/Depr(3y)65.22%
Cap/Depr(5y)58.27%
Cap/Sales(3y)N/A
Cap/Sales(5y)N/A
Profit Quality(3y)N/A
Profit Quality(5y)N/A
High Growth Momentum
Growth
EPS 1Y (TTM)-6.32%
EPS 3YN/A
EPS 5YN/A
EPS Q2Q%-259.25%
EPS Next Y-49.12%
EPS Next 2Y-5.22%
EPS Next 3Y-8.96%
EPS Next 5Y11.08%
Revenue 1Y (TTM)7.73%
Revenue growth 3Y221.37%
Revenue growth 5Y90.78%
Sales Q2Q%-5.14%
Revenue Next Year0.34%
Revenue Next 2Y1.48%
Revenue Next 3Y2.42%
Revenue Next 5Y3.12%
EBIT growth 1Y-52.42%
EBIT growth 3Y205.63%
EBIT growth 5Y61.02%
EBIT Next Year33.81%
EBIT Next 3Y16.27%
EBIT Next 5Y16.31%
FCF growth 1Y-105.67%
FCF growth 3YN/A
FCF growth 5YN/A
OCF growth 1Y-73.81%
OCF growth 3YN/A
OCF growth 5YN/A