Denny's Corporation

Denny's Corporation (Nasdaq: DENN) - tasty stock for investors?
Contributed by: Gediminas J.Date: 15 May, 2008

Denny's Corporation (Nasdaq: DENN) engages in the operation of family-style restaurants. Currently, the company has 373 company-owned and operated units and 1,177 franchised and licensed units. Denny's has operations in the United States, Canada, Costa Rica, Guam, Mexico, New Zealand and Puerto Rico. The company announced their 1st quarter results on April 29, 2008. Income from operations decreased for the second quarter in a row. According to the latest SEC filing the company had revenues of nearly $196 million which was 17% less than the same period a year ago. Despite that, the company still managed to pull a net income of $4.1 million which was 4 times more than a year ago.
The seemingly alerting revenue decrease was due to the sale of a few franchised restaurants. Denny's had sold one company restaurant and 21 of their franchised outlets to franchisees. The company has also added 9 new franchised restaurants and one company restaurant in the first quarter of 2008.

The president and CEO of Denny's Corporation, Nelson Marchioli, is optimistic about the company's future: "We are pleased with the progress we are making to optimize our business model and strengthen our balance sheet, despite the difficult operating and economic environment impacting our industry. We are confronting the challenges of reduced consumer spending and rising commodity costs with promotional items that have strong customer appeal and offer a compelling value but are also designed to benefit our food cost margins. In addition, our current marketing campaign ‘Real Breakfast 24/7' powerfully emphasizes the quality and value of Denny's real breakfast experience."

Denny's stock soared up shortly after the earnings release. From a fully technical point of view the stock appears to be forming a rather stable uptrend. Also the forming of a "rounding-bottom reversal-pattern" can be identified in the stock's behavior, meaning the price will most probably gradually get higher. Further, the company had a PEG ratio equal to 0.43 the last time I checked, which supports the assumption of current stock undervaluation.