Brinker International has been on fire lately. In the past six months alone, the company’s stock price has rocketed 61.8%, reaching $230.44 per share. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is it too late to buy EAT? Find out in our full research report, it’s free.

Why Does Brinker International Spark Debate?

Founded by Norman Brinker in Dallas, Brinker International (NYSE: EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.

Two Things to Like:

1. Surging Same-Store Sales Show Increasing Demand

Same-store sales is an industry measure of whether revenue is growing at existing restaurants, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).

Brinker International has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 14.6%.

2. Increasing Free Cash Flow Margin Juices Financials

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Brinker International’s margin expanded by 1.9 percentage points over the last year. This is encouraging because it gives the company more optionality. Brinker International’s free cash flow margin for the trailing 12 months was 9.6%.

One Reason to Be Careful:

Lack of New Restaurants, a Headwind for Revenue

A restaurant chain’s total number of dining locations influences how much it can sell and how quickly revenue can grow.

Brinker International operated 1,635 locations in the latest quarter, and over the last two years, has kept its restaurant count flat while other restaurant businesses have opted for growth.

When a chain doesn’t open many new restaurants, it usually means there’s stable demand for its meals and it’s focused on improving operational efficiency to increase profitability.

Final Judgment

Brinker International’s positive characteristics outweigh the negatives, and after the recent rally, the stock trades at 17.6× forward P/E (or $230.44 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.

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