Analyzing Small Cap Stocks: Boston Pizza
The TDR Three Key Takeaways regarding Analyzing Small Cap Stocks of Boston Pizza:
1. Boston Pizza offers a dividend yield of 8.6%, appealing to investors.
2. Boston Pizza’s $101 million revenue with a steady 14% three-year growth.
3. Boston Pizza’s low expenses and consistent cash flow attract investors.
Boston Pizza (TSX: BPF-UN), a Canadian-based restaurant chain, operates as a royalty trust, allowing investors to benefit directly from the company’s sales without the operating costs. With 372 franchise locations spread across Canada, the US, and Mexico, the company offers a dividend yield of 8.6%, supported by a growth rate of 9.7% over the last year.
In the previous fiscal year, Boston Pizza reported a revenue of $101 million, reflecting a 2.5% growth over the past 12 months and 14% over three years. This steady growth is partly attributable to the post-pandemic recovery. The company’s business model, where investors receive 5.5% of the sales, comprises 4% from the top line and an additional 1.5% from underlying investments. This model ensures that investors are insulated from rising food costs and other operational expenses, effectively making the investment akin to a tax on the restaurant’s sales.
Boston Pizza’s financial health is further highlighted by its levered free cash flow, which stood at $37.8 million last year, slightly up from $37 million the previous year. Net income for the same period was approximately $29.8 million. The company’s impressive gross marginal profit, effectively 100%, means that the bulk of the revenue is directed towards shareholders, with minimal deductions for operational expenses.
The company’s credit score of 7 underscores its strong financial stability and low risk of default. Co-owned by Jim Treeliving, a prominent entrepreneur and former host of “Dragon’s Den,” Boston Pizza enjoys brand recognition and loyalty, particularly in Canada.
Despite the competitive restaurant industry, Boston Pizza’s strategic business model and solid financials make it an intriguing investment. With consistent cash flow, high dividend yields, and minimal operational costs, it offers a stable and attractive return for investors seeking a reliable small-cap stock. Want to be updated on all things Psychedelic, Cannabis, AI, and Crypto? Subscribe to our Daily Baked in Newsletter!
