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Analysis & Valuation Using Financial Statements Specialty Eateries – Einstein Noah Dennis Dai

Analysis & Valuation Using Financial Statements Specialty Eateries – Einstein Noah Dennis Dai. Agenda. Company Background Simple Analysis and Parsimonious Forecasting EPM from Sales Data Summary Growth Rate and Comparison Sales EPM from Sales EATO Multiyear Forecast FCF

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Analysis & Valuation Using Financial Statements Specialty Eateries – Einstein Noah Dennis Dai

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  1. Analysis & Valuation Using Financial Statements Specialty Eateries – Einstein Noah Dennis Dai

  2. Agenda • Company Background • Simple Analysis and Parsimonious Forecasting • EPM from Sales • Data Summary • Growth Rate and Comparison • Sales • EPM from Sales • EATO • Multiyear Forecast • FCF • Valuation using FCF • Ending

  3. Company Background • Einstein Noah Restaurant Inc. • largest owner/operator, franchisor and licensor of bagel specialty restaurants in the United States. • Business presence • it had 817 restaurants in 40 states and in the District of Columbia. • Business Emphasize • high-quality foods for breakfast, lunch and afternoon snacks in a bakery-café atmosphere • Brands • Einstein Bros. restaurants, • Noah’s restaurants in California • Manhattan Bagel restaurants

  4. EPM from Sales • Excluding • Restructuring expense • Strategic alternative expense • Unrealized gain on cash flow hedge • Reclassification of losses included in net income

  5. Data Summary

  6. Sales

  7. Lower Higher Sales • Slow moving US economy • Increased competition • Aggressive pricing strategies in casual dining • Lower customer traffic in restaurant industry • Most customers seeking value • Downward revenue pressure • Strong cost controls maintain profit margin • Franchisee strategy • Everyday value strategy • Health concern • Bulk sale and catering services • driving frequency through increased coffee and specialty beverage focus

  8. Sales • Earnings conference call • Sales moderated • Focus on cost cutting • Focus on franchising • Value menu expansion • Analysts expectations • Hold/(Buy) • Moderate earnings growth projections for 2014-2016 • High: 6% Low: 1.2% Median: 2-3%

  9. EPM from Sales

  10. EPM from Sales Relatively stable EPM Stable EPM for comparable firms Lower profit margin and increased competition Cost cutting measures but with “?”

  11. EATO

  12. EATO Steady increase Mixed results for comparable firms Expect to invest heavily for 2014-2015 Franchise without bearing the full cost

  13. Forecast Sales: 2% EPM from Sales: 3.5% EATO: 2.7

  14. FCF

  15. Valuation

  16. Thanks!Q&A

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