Buying MHGU Before Rest of Market Discovers This Undervalued Gem
Meritage Hospitality Group Inc. operates quick-service (Wendy’s) and casual dining restaurants. As of April 17, 2015, it operated 151 restaurants in Florida, Georgia, Michigan, North Carolina, South Carolina, and Virginia.
On June 1, 2015, we alerted GeoInvesting premium members that we initiated a moderate sized long position in MHGU and coded the stock a GeoBargain on the Radar when trading at around $7.90. Our action was based on a robust fiscal 2015 growth outlook and a 100% increase in its previous special dividend announced on May 20, 2015.
On July 14, 2015 MHGU reported strong fiscal 2015 second quarter results:
Quotes from management:
“Our newly renovated Wendy’s restaurants are generating compelling double digit same-store-sales increases along with high customer satisfaction. The system goal is to have 60% of the restaurants image activated by the end of 2020, and we are currently on schedule for 10% of our restaurants to be image activated by year end,” stated Meritage CEO, Robert E. Schermer, Jr.
“Additionally, the Company is developing a multi-year project pipeline for expansion in its uniquely branded chef-casual restaurants, which we believe will continue to enhance operating margins,” added Mr. Schermer.”
Management stated the Company is currently performing ahead of its 2015 earnings guidance listed below:
Valuation metrics and scenarios
The GeoTeam interviewed CEO, Robert Shermer, on June 17, 2015, and promptly coded MGHU as a GeoBargain at $8.50. Our key takeaways from the interview include:
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