Check out our latest venture called BlackBox (click here). As part of our new initiative, we are putting together a new series, which will include a brief bull versus bear debate for certain stocks. If you have any requests feel free to shoot us an email at email@example.com. Beyond that, we will be taking request for deeper, more in-depth, analysis on certain stocks we cover in the bull v/s bear series. We plan on making those in-depth reports available via BlackBox.
The first in this series is DineEquity (NYSE:DIN); a stock we really like but has taken heat in the market. We'll start by using some of our analysis from other platforms, but ultimately develop a stable of inhouse writers that we will pit against eachother. Then, we plan on letter readers vote on the winner of the bull v/s bear debate. Sign up at BlackBox to key up to date.
DineEquity - Owner of AppleBee's and IHOP
Bull case - Bridgewater Investments
Firstly, we don't believe a material top line recovery is fundamental to DineEquity's success. Blackstone is forecasting a 10% fall in revenues over the next three years. We believe the company has a sustainable top line thanks to its various initiatives, and it should also get some derivative strength from a strengthening economy.
Granted DineEquity took a couple years off from paying a dividend, prior to 2009 it paid a dividend yield for 25 quarters straight, and in 2013 it reinstated its dividend and has paid a 75 cent dividend payment for three consecutive quarters.
When it comes to cash flows, we don't believe that DineEquity will see the kind of reduction and deterioration that Blackstone is forecasting. The company has proved that it can generate solid levels of cash flow by being relatively innovative, including the continuation of offering new menu items and revamping its stores. It's also putting stores in more innovative locations. With a 3.7% dividend yield, DineEquity is a stock worth owning.
Bear case - Blackstone Equity Research
After analyzing the current issues faced by the company, with respect to its top-line which also depends on the future outlook of the industry, major recovery or growth in the company's top-line cannot be seen in the near future. While the company continues to wrestle with the industry trends, the conversion to the 99% franchise business model has also prompted a decline in the top line and this is a well-known after-effect of such a move. Bottom-line performance in terms of margins was impressive as a result of the transformed business model. The company has not been paying dividends the past three years and based on cash flows its stock is overvalued. Hence, the company's stock price is a bubble that will burst in the near future. Therefore I advise taking a selling position with regards to this stock.