Denny's (DENN) AI Stock Analysis

• Market Cap: $176.56M
• Dividend Yield: N/A
• Average Volume (3M): 1.53M
• Price to Earnings (P/E): 8.2
• Beta (1Y): 1.30
• Revenue Growth: -2.50%
• EPS Growth: 15.46%
• Country: US
• Employees: 3,800
• Sector: Consumer Cyclical
• Sector Strength: 60
• Industry: Restaurants
• EPS (TTM): 0.41
• Shares Outstanding: 51,476,067
• 10 Day Avg. Volume: 1,546,358
• 30 Day Avg. Volume: 1,534,685
• PEG Ratio: 0.53
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.45
• Price to Cash Flow (P/CF): 5.90
• P/FCF Ratio: 9.40
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $7.42
• Price Target Upside: 154.98% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 6

Denny's overall stock score of 52 reflects a challenging financial landscape marked by high leverage and declining operational margins. Technical indicators highlight bearish momentum, while the reasonable valuation offers some stability. The earnings call underscores strategic optimism but acknowledges near-term challenges. Investors should closely monitor Denny's ability to improve its financial health and operational efficiency.

Positive Factors

Brand Initiatives

Various initiatives like remodels, customer experience improvements, and a revamped marketing message lend credibility to the brand's potential positives.

Operational Efficiency

Greater discipline at the cost level, with a 5-6% reduction in core G&A spend over the next several years and tech upgrades providing a tailwind to store-level profits.

Stock Valuation

The shares are trading at a low multiple of projected EBITDA with a favorable risk-reward balance, leading to an upgrade from Neutral to Buy.

Negative Factors

Demographic Challenges

Fundamental brand/category headwinds, such as low-income and older demographic, make it challenging for Denny's initiatives to drive positive traffic.

Financial Performance

DENN reported profitability results that fell short of consensus expectations, with revenues below consensus and adjusted EPS falling short as well.

Same-Store Sales Trends

Management pointed to a material slowdown in SSS trends due to headwinds such as weather, consumer uncertainty, and inflationary pressures.

Denny's Business Overview & Revenue Model

Company Description

Denny's Corporation (DENN) is a leading American table-service diner-style restaurant chain, founded in 1953. Headquartered in Spartanburg, South Carolina, Denny's operates primarily in the casual dining sector, offering a diverse menu that includes breakfast, lunch, dinner, and dessert options. Known for its all-day breakfast and 24/7 operating hours, Denny's caters to a wide demographic across its locations in the United States and several international markets.

How the Company Makes Money

Denny's generates revenue primarily through two main streams: company-operated restaurants and franchised restaurant operations. In company-operated locations, Denny's earns money directly through the sale of food and beverages to customers. For franchised restaurants, revenue is generated through initial franchise fees, ongoing royalty fees based on a percentage of sales, and other related fees. Denny's also benefits from partnerships with franchisees, enabling expansion with lower capital investment while receiving consistent revenue from franchise operations. Additionally, Denny's leverages its brand and marketing strategies to maintain customer loyalty and drive sales across all locations.

Denny's Financial Statement Overview

Summary

Denny's exhibits a mixed financial performance. Although the gross profit margin has improved significantly, operational margins have declined, and revenue has decreased. High leverage and negative equity present financial stability risks, while weakened cash flow underscores potential liquidity issues.

Income Statement

Denny's has shown fluctuating revenue with a decrease from $463.9M in 2023 to $452.3M in 2024. Gross profit margin improved to 73.4% from last year’s 33.2%, indicating better cost control, while the net profit margin saw slight improvement to 4.8% from 4.3%. However, EBIT and EBITDA margins decreased, suggesting challenges in operational efficiency.

Balance Sheet

The balance sheet presents significant leverage concerns, with a negative equity of $34.0M and a high debt-to-equity ratio due to negative equity. Total debt increased slightly to $408.2M. The equity ratio is negative, indicating total liabilities exceed total assets, posing a financial stability risk.

Cash Flow

Free cash flow decreased substantially from $62.1M in 2023 to $0.9M in 2024, indicating reduced cash generation. The operating cash flow to net income ratio is healthy at 1.37, but the free cash flow to net income ratio is significantly lower, signaling potential cash flow challenges.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
452.33M	463.92M	456.43M	398.17M	288.61M
	Gross Profit
332.11M	153.87M	141.64M	142.10M	79.69M
	EBIT
45.32M	52.82M	113.20M	104.08M	10.85M
	EBITDA
62.08M	63.77M	78.80M	75.55M	25.15M
	Net Income Common Stockholders
21.57M	19.95M	74.71M	78.07M	-5.12M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.80M	6.17M	5.27M	33.17M	6.16M
	Total Assets
496.27M	464.82M	498.33M	435.53M	430.95M
	Total Debt
408.20M	395.26M	411.45M	324.82M	379.76M
	Net Debt
406.50M	390.37M	407.93M	294.20M	375.87M
	Total Liabilities
530.30M	527.50M	535.45M	500.79M	561.39M
	Stockholders Equity
-34.02M	-62.69M	-37.12M	-65.27M	-130.45M
Cash Flow		Free Cash Flow
918.00K	62.15M	27.61M	68.82M	-10.10M
	Operating Cash Flow
29.49M	72.13M	39.45M	76.17M	-3.14M
	Investing Cash Flow
-26.67M	-7.56M	-86.60M	29.01M	4.65M
	Financing Cash Flow
-6.01M	-63.19M	20.04M	-78.45M	-994.00K

Denny's Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 2.91
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DENN, the sentiment is Negative. The current price of 2.91 is below the 20-day moving average (MA) of 3.79, below the 50-day MA of 4.78, and below the 200-day MA of 6.02, indicating a bearish trend. The MACD of -0.34 indicates Negative momentum. The RSI at 35.20 is Neutral, neither overbought nor oversold. The STOCH value of 24.06 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DENN.

Denny's Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CAKE	71 Outperform	$2.29B	13.87	41.18%	2.43%	4.13%	56.76%
EAT	71 Outperform	$6.07B	23.08	2390.91%	―	13.67%	69.41%
BJRI	67 Neutral	$716.76M	44.63	4.54%	―	1.81%	-15.53%
Sector *	59 Neutral	$10.97B	9.83	-1.56%	4.06%	1.31%	-16.49%
DIN	56 Neutral	$321.70M	5.00	-42.81%	9.67%	-2.26%	-32.36%
DENN	52 Neutral	$176.56M	8.21	-63.40%	―	-2.50%	15.46%
RRGB	41 Neutral	$57.12M	―	92.02%	―	-4.19%	-266.52%

Denny's Corporate Events

Denny’s Reports Strong Q4 2024 Financial Results

Denny’s Corporation reported its financial results for the fourth quarter and full year of 2024, showing strong performances from both Denny’s and Keke’s brands. Despite a slight decrease in total operating revenue for the year, the company highlighted progress in its strategy by closing lower-volume restaurants, completing remodels, and expanding Keke’s into new states. Operating income for the fourth quarter increased significantly, and the company achieved a record number of Keke’s cafe openings. Looking forward, Denny’s aims to maintain its position as a value leader while managing macroeconomic challenges and enhancing shareholder value through strategic investments and cost reductions.

Denny’s Reports Positive Sales and Strategic Expansion

Denny’s Corporation reported preliminary financial results for the fourth quarter and the fiscal year 2024, showing positive developments in domestic system-wide same-restaurant sales for both Denny’s and Keke’s brands. Despite closing underperforming locations, the company continued with its Denny’s Diner 2.0 remodels and increased the number of Keke’s cafes, including entering new states. The results reflect a commitment to strategic execution, contributing to operational efficiency and shareholder value, and indicate expected low-end achievement of EBITDA guidance.