Burger King Holdings (BKC)

The economic recession has put a pinch on consumers' pockets. Fast food restaurants like Burger King that offer value meals and low cost menu items stand to benefit from this value-seeking behavior. Same store sales rose 2% in Q2 '09, and the projected long-lasting duration of the global economic recession will likely drive this number higher.

Burger King (BKC) is midway through a revitalizing transition and appears to have strong momentum. After falling miserably behind competitors in the late 1990’s the company was taken private and given new management and a new growth strategy. The stock was launched in early 2006 and quickly saw its shares fall from the initial trading range. But after hitting a low in August, the stock began a run that more than doubled the value of the company. Since the beginning of this year, the stock has pulled back on concerns of a weakening consumer and in conjunction with broad markdowns in equity indices. The intrinsic value, however, appears to be building and will likely drive the stock higher in future months

Burger King (BKC) is midway through a revitalizing transition and appears to have strong momentum. After falling miserably behind competitors in the late 1990’s the company was taken private and given new management and a new growth strategy. The stock was launched in early 2006 and quickly saw its shares fall from the initial trading range. But after hitting a low in August, the stock began a run that more than doubled the value of the company. Since the beginning of this year, the stock has pulled back on concerns of a weakening consumer and in conjunction with broad markdowns in equity indices. The intrinsic value, however, appears to be building and will likely drive the stock higher in future months

While largely considered an American phenomenon, the burger industry has expanded to cover a large geographic compilation of countries. While Burger King’s largest rival McDonalds (MCD) has roughly 16,000 locations outside the US, BKC has built its international store count to 4,000. This leaves ample room to continue to expand simply by mimicking its competitor without running out of new potential locations.

Burger King has been successful on the home front in making its restaurants more attractive to customers. An initiative to remodel a number of aging stores has been very successful in re-invigorating sales levels at each store and so the company is planning to leverage this success on a growing number of other eligible locations. Corporate strategists have also mandated new store hours requiring all franchised stores to stay open later into the night. The addition of a breakfast menu has added revenue during times that locations had previously sat idle. The new initiatives have produced impressive increases in top line revenues.

As revenues increase from International expansion and rising same store sales domestically, management is also hard at work to address cost issues and thus allow more of the incremental sales dollars fall to the bottom line. A new broiler model has been adopted and will be in all stores by 2010. The appliance consumes significantly less power, thus cutting down on one of the larger fixed costs associated with each store. The added leverage has the company looking for long term revenue growth of 6-7%, EBITDA growth of 10-12% and net income growth of roughly 20%. This is an ambitious growth plan but could add significantly to shareholder value.

Plus the brunt of the bad news story's. However, based on their valuation this company is still a little over priced. Too much debt and too little cash on the books. They are also 3 times over book value and have a current ratio under 1. In this kind of market people like to see companies with low debt and higher cash reserves however BKC does have a good growth story. They have a much better balance sheet than say MCD, but have a comparable p/e Wait until this rally is over and pick up some BKC in the teens. "Price is what you pay; value is what you get."

The brokerage Robert W. Baird & Co announced an "outperform" rating for Burger King in its analysis of the global restaurant industry. The brokerage cited a steady demand for dining out, continued population growth, and increased per-capital incomes as driving forces behind Burger King's growth.