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BLOOMIN BRANDS

Yuanting Shi
David Dong
David Xu
Yufei Yan
Haochen Wei

10/01/2016

1.) Which of the twelve potential competitors described in the case do you consider
to be an appropriate comparable to Bloomin Brands? Explain your answer.
Among the twelve potential competitors, we consider Chipotle Mexican Grill is most
comparable to Bloomin Brands considering their size, geographic presence and type
of business:
Bloomin Brands
Chipotle Mexican Grill
Size
1,500 casual dining
2,000 fast-casual
restaurants
restaurants
Geographic presence
US, Puerto Rico, Guam,
US, Canada, Britain,
and over 20 countries
Germany and France
Type of business
90% are company-owned
Company-owned
(or texas roadhouse because they sell steak? How do you guys think?)
2.) Using the information in Exhibit 1, value Bloomin Brands using a multiples
approach. Does the company appear to be over- or under-valued?
In general, using just the P/E ratio would make high-growth companies appear
overvalued relative to others. To compare companies with different growth rate, we
should use PEG ratio. A fairly valued company will have its PEG ratio close to 1
(stock is reasonably valued given the expected growth). And for investors, the
lower PEG ratio the better (a lower PEG means that the stock is undervalued more).
Currently, Bloomin Brands has a PEG ratio of 3.3, much higher than 1. Thus,
Bloomin Brands is over-valued.

PE TTM
PE forward
EPS g
PEG
Mkt cap (B)
EPS
Price TTM
Price forward

CMG
58.8
38.1
17.70%
1.5
11.6
6.76
397.488
257.556

TXRH
29.5
22.9
13.30%
2.2
3.3
1.58
46.61
36.182

BLMN
40.2
12.6
12.10%
3.3
2.2
0.48
19.296
6.048

3.) What additional information or analyses would be useful to further refine your
value estimate from 2.)? Explain your answer.
PEG ratio is sensitive to expected EPS growth rates, which are subject to the
limitations of projecting future events.
(havent learned yet, copied from Wikipedia):

To justify the expectation, we should further analyze economy, market conditions,


expansion setbacks, hype of investors, as well as ROE ratio.
Particularly, PEG ratio is less appropriate for measuring companies without high
growth. First, the absolute company growth rate used in the PEG does not account
for the overall growth rate of the economy, and hence an investor must compare a
stock's PEG to average PEG's across its industry and the entire economy to get any
accurate sense of how competitive a stock is for investment. A low (attractive) PEG
in times of high growth in the entire economy may not be particularly impressive
when compared to other stocks, and vice versa for high PEG's in periods of slow
growth or recession. In addition, company growth rates that are much higher than
the economy's growth rate are unstable and vulnerable to any problems the
company may face that would prevent it from keeping its current rate. Therefore, a
higher-PEG stock with a steady, sustainable growth rate (compared to the
economy's growth) can often be a more attractive investment than a low-PEG stock
that may happen to just be on a short-term growth "streak". A sustained higherthan-economy growth rate over the years usually indicates a highly profitable
company, but can also indicate a scam, especially if the growth is a flat percentage
no matter how the rest of the economy fluctuates (as was the case for several
years for returns in Bernie Madoff's Ponzi scheme). Finally, the volatility of highly
speculative and risky stocks, which have low price/earnings ratios due to their very
low price, is also not corrected for in PEG calculations. These stocks may have low
PEG's due to a very low short-term (~1 year) PE ratio (e.g. 100% growth rate from
$1 to $2 /stock) that does not indicate any guarantee of maintaining future growth
or even solvency.