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FAST Graphs

FAST Graphs

F.A.S.T. Graphs™ is a powerful research tool providing "essential fundamentals at a glance" on over 17,000 symbols. F.A.S.T. Graphs™ empowers the user to research stocks…

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Cracker Barrel: Fundamental Stock Research Analysis

This article is going to examine the home-style country restaurant Cracker Barrel (CBRL) through the lens of FAST Graphs™ - fundamentals analyzer software tool, which shows us a picture of a company that is currently in value. The prudent growth and dividend investor may want to do their own due diligence into this fine company for possible addition to their own portfolio.

Earnings Determine Market Price: The following earnings and price correlated FAST Graphs™ clearly illustrates the importance of earnings. The Earnings Growth Rate Line or True Worth™ Line (orange line with white triangles) is correlated with the historical stock price line. On graph after graph the lines will move in tandem. If the stock price strays away from the earnings line (over or under), inevitably it will come back to earnings.

Earnings & Price Correlated Fundamentals-at-a-Glance

A quick glance at the historical earnings and price correlated FAST Graphs™ on Cracker Barrel shows a picture of a company that is in-value based upon the historical earnings growth rate of 11.2% and a current PE of 14.6. Analysts are forecasting the earnings growth to continue at about 10%, and when you look at the forecasting graph below, the stock appears in-value, (it's inside of the value corridor of the five orange lines - based on future growth).

Cracker Barrel: Historical Earnings, Price, Dividends and Normal PE Since 2002

Cracker Barrel Old Ctry Stor (CBRL)

Performance Table Cracker Barrel

The associated performance results with the earnings and price correlated graph, validates the principles regarding the two components of total return; capital appreciation and dividend income. Dividends are included in the total return calculation and are assumed paid, but not reinvested.

When presented separately like this, the additional rate of return a dividend paying stock produces for shareholders becomes undeniably evident. In addition to the 7.9% capital appreciation (green circle), long-term shareholders of Cracker Barrel, assuming an initial investment of $1,000, would have received an additional $217.08 in dividends (blue highlighting) that increased their total return from 7.9% to 8.8% per annum versus 3.7% in the S&P 500.

Cracker Barrel Old Ctry Stor (CBRL)

The following graph plots the historical PE ratio (the dark blue line) in conjunction with 10-year Treasury note interest. Notice that the current price earnings ratio on this quality company is as normal as it has been since 2002.

Cracker Barrel Old Ctry Stor (CBRL)

A further indication of valuation can be seen by examining a company's current price to sales ratio relative to its historical price to sales ratio. The current price to sales ratio for Cracker Barrel is .61 which is historically normal.

Cracker Barrel Old Ctry Stor (CBRL)

Looking to the Future

Extensive research has provided a preponderance of conclusive evidence that future long-term returns are a function of two critical determinants:

  1. The rate of change (growth rate) of the company's earnings

  2. The price or valuation you pay to buy those earnings

Forecasting future earnings growth, bought at sound valuations, is the key to safe, sound, and profitable performance.

The Estimated Earnings and Return Calculator Tool is a simple yet powerful resource that empowers the user to calculate and run various investing scenarios that generate precise rate of return potentialities. Thinking the investment through to its logical conclusion is an important component towards making sound and prudent commonsense investing decisions.

The consensus of 9 leading analysts reporting to Capital IQ forecast Cracker Barrel's long-term earnings growth at 10% (orange circle). Cracker Barrel has medium long-term debt at 58% of capital (red circle). Cracker Barrel is currently trading at a P/E of 14.6, which is inside the value corridor (defined by the five orange lines) of a maximum P/E of 18. If the earnings materialize as forecast, Cracker Barrel's True Worth™ valuation would be $120.57 at the end of 2018 (brown circle on EYE Chart), which would be a 13% annual rate of return from the current price (yellow highlighting).

Cracker Barrel Old Ctry Stor (CBRL)

Earnings Yield Estimates

Discounted Future Cash Flows: All companies derive their value from the future cash flows (earnings) they are capable of generating for their stakeholders over time. Therefore, because Earnings Determine Market Price in the long run, we expect the future earnings of a company to justify the price we pay.

Since all investments potentially compete with all other investments, it is useful to compare investing in any prospective company to that of a comparable investment in low risk Treasury bonds. Comparing an investment in Cracker Barrel to an equal investment in 10 year Treasury bonds, illustrates that Cracker Barrel's expected earnings would be 7 (purple circle) times that of the 10 Year T-Bond Interest. (See EYE chart below). This is the essence of the importance of proper valuation as a critical investing component.

Cracker Barrel Old Ctry Stor (CBRL)

Summary & Conclusions

This report presented essential "fundamentals at a glance" illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although, with just a quick glance you can know a lot about the company, it's imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.


Disclosure: No position at the time of writing.


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