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Ruby Tuesday, Inc. Message Board

  • rav3_d rav3_d Mar 11, 2010 3:48 PM Flag

    Now what?

    Disclaimer: I trade mostly on technicals and don't know much about the company's prospects.

    Bought on the breakout at 8.75.

    Long-term the chart looks pretty strong. 9 had been resistance for 3 years, and we have a huge inverse head-and-shoulders pattern. The steep drop in 2007 would seem to offer little resistance until at least the 14 area.

    Nevertheless these kinds of explosive moves in stocks tend to unwind as quickly as they unfold, so I would not be surprised to see a big correction in RT back down to the $9 area to see if that prior resistance can become support.

    Problem is, this might not happen until we do get to $14.

    I have some nice profits here and tempted to sell but something tells me this could be a $22 stock within a few months.

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    • Fundamental take...I think it can get to 12x cash flow. That's about $18 or so from here.

      Problem is, I think RT will issue equity at some point. I see 10 million shares coming, and that will be used to pay down the LOC, which comes due in 1-2 years, and we just can't get there using free cash flow alone. I think about $100 million in equity is going to be required, and that means, obviously the longer RT waits, the fewer the number of shares.

      This was once a $30 stock...which tells me it has the ability to generate earnings supportive of a $30 price. I actually think given the store refresh and slightly more upscale menu, earnings power can get back there or even beyond.

      As such, a mid-$20 number here wouldn't surprise me either. We'll need to see earnings growth first, but it will get there.



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