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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

Taking everything into account, FRG scores 3 out of 10 in our fundamental rating. FRG was compared to 124 industry peers in the Specialty Retail industry. FRG has a bad profitability rating. Also its financial health evaluation is rather negative. 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

In the past year FRG was profitable.
In the past year FRG had a positive cash flow from operations.
In multiple years FRG reported negative net income over the last 5 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

The profitability ratios for FRG are negative, so there is not much use analyzing them.
FRG has a Return On Invested Capital (4.68%) which is in line with its industry peers.
FRG had an Average Return On Invested Capital over the past 3 years of 7.05%. This is below the industry average of 11.79%.
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

FRG has a Operating Margin of 3.57%. This is comparable to the rest of the industry: FRG outperforms 54.55% of its industry peers.
In the last couple of years the Operating Margin of FRG has declined.
Looking at the Gross Margin, with a value of 39.81%, FRG is in the better half of the industry, outperforming 62.88% of the companies in the same industry.
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

With a Return on Invested Capital (ROIC) below the Cost of Capital (WACC), FRG is destroying value.
The number of shares outstanding for FRG has been reduced compared to 1 year ago.
Compared to 1 year ago, FRG has a worse debt to assets ratio.
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.
FRG has a worse Altman-Z score (1.63) than 65.91% of its industry peers.
A Debt/Equity ratio of 6.97 is on the high side and indicates that FRG has dependencies on debt financing.
Looking at the Debt to Equity ratio, with a value of 6.97, FRG is doing worse than 80.30% of the companies in the same industry.
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

FRG has a Current Ratio of 1.37. This is a normal value and indicates that FRG is financially healthy and should not expect problems in meeting 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.
FRG has a Quick Ratio of 1.37. This is a bad value and indicates that FRG is not financially healthy enough and could expect problems in meeting its short term obligations.
FRG has a Quick ratio (0.60) which is comparable to the rest of the industry.
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

The earnings per share for FRG have decreased by -6.32% in the last year.
FRG shows a small growth in Revenue. In the last year, the Revenue has grown by 7.73%.
Measured over the past years, FRG shows a very strong growth in Revenue. The Revenue has been growing by 90.78% on average per year.
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

Based on estimates for the next years, FRG will show a quite strong growth in Earnings Per Share. The EPS will grow by 11.08% on average per year.
FRG is expected to show a small growth in Revenue. In the coming years, the Revenue will grow by 3.12% yearly.
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

When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
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

A Price/Earnings ratio of 8.39 indicates a reasonable valuation of FRG.
Based on the Price/Earnings ratio, FRG is valued a bit cheaper than 76.52% of the companies in the same industry.
The average S&P500 Price/Earnings ratio is at 26.82. FRG is valued rather cheaply when compared to this.
FRG is valuated reasonably with a Price/Forward Earnings ratio of 9.34.
FRG's Price/Forward Earnings ratio is a bit cheaper when compared to the industry. FRG is cheaper than 72.73% of the companies in the same industry.
FRG's Price/Forward Earnings ratio indicates a rather cheap valuation when compared to the S&P500 average which is at 35.24.
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 20 40 60

4.2 Price Multiples

FRG's Enterprise Value to EBITDA is on the same level as the industry average.
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

A cheap valuation may be justified as FRG's earnings are expected to decrease with -8.96% in the coming years.
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 5.90, FRG pays a better dividend. On top of this FRG pays more dividend than 96.21% of the companies listed in the same industry.
FRG's Dividend Yield is rather good when compared to the S&P500 average which is at 2.36.
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

The earnings of FRG are negative and hence is the payout ratio. FRG will probably not be able to sustain this dividend level.
FRG's earnings are growing slower than its dividend. 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