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Famous Dave's of America Inc. Message Board

  • electronicsuniverse1 electronicsuniverse1 Dec 29, 2007 12:17 AM Flag

    Stock Repurchase makes no sense

    Why is a company that's trying to expand purchasing it's own stock? This is usually done by an established company with cash to burn. DAVE only has $3 million in cash and over $15 million in debt. How can you expand and buy stock at the same time if you have very little cash? I'm also worried that the repurchase is artificially holding up the stock price and when they're done buying this thing is going to tank. I'm trying to sell but the volume has been too low the past couple of days and the price is dropping.

    Also, how can they afford to buy 1 million shares with only $3 million in cash? That would have cost them at least $12-13 million. Are they using debt to purchase stock? If so, that could be a nightmare.

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    • Return on Assets (ttm): 10.05%
      Return on Equity (ttm): 16.67%

      In addition, with a debt to asset ratio as good as Dave's they can afford to borrow one hell of a lot of money to build more company owned stores, which are more profitable to them. Don't under estimate these guys - they know how to make money for themselves and for the company.

    • Okay, since you're not very well versed on investing (you should be buying MUTUAL FUNDS - not even individual stock let alone small/micro caps!), lets go over something ...

      DAVE's business model does NOT use a lot of cash ... they only need enough cash to support expansion of their company owned stores. Their franchise model generates PLENTY of cash ...

      $3m in cash, $15 in debt, do you think that is BAD??? They use debt b/c this combination for them make for an EFFICIENT capital structure.

      Their business is a CASH COW ... you might want to look at how much cash they GENERATE from quarter to quarter, and year to year ... THAT is how they can pay for a STOCK BUYBACK.

    • The fact that the company has the financial strength to repurchase 25% of it's stock over the last few years shows that it has an operationally sound cash flow and that it believes the stock price is cheap compared to where it will be in a year or two.

      BTW, quit pretending you are long the stock and 'trying somehow to get out'. That kind of post is as silly as the 'I just went to Famous Dave's and the food sucked and the place was empty' kind of post.

 
DAVE
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