Bravo Brio Restaurant Group Inc (NASDAQ:BBRG), a USD$34.21M small-cap, operates in the consumer discretionary industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy leisure products. Consumer discretionary analysts are forecasting for the entire industry, a strong double-digit growth of 11.16% in the upcoming year , and a strong near-term growth of 15.75% over the next couple of years. This rate is more than double the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, as well as evaluate whether Bravo Brio Restaurant Group is lagging or leading in the industry. Check out our latest analysis for Bravo Brio Restaurant Group
What’s the catalyst for Bravo Brio Restaurant Group’s sector growth?
Rising competition for consumer attention from new activities such as online streaming and mobile games has forced traditional incumbents to adapt or fall behind. However, the leisure service industry as a whole has been expanding. In the previous year, the industry saw growth in the teens, beating the US market growth of 10.93%. Bravo Brio Restaurant Group lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its leisure peers. As the company trails the rest of the industry in terms of growth, Bravo Brio Restaurant Group may also be a cheaper stock relative to its peers.
Is Bravo Brio Restaurant Group and the sector relatively cheap?
Leisure companies are typically trading at a PE of 24x, higher than the rest of the US stock market PE of 19x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a similar 11.34% on equities compared to the market’s 10.46%. Since Bravo Brio Restaurant Group’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Bravo Brio Restaurant Group’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Bravo Brio Restaurant Group has been a leisure industry laggard in the past year. If your initial investment thesis is around the growth prospects of Bravo Brio Restaurant Group, there are other leisure companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Bravo Brio Restaurant Group fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If Bravo Brio Restaurant Group has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its leisure peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at Bravo Brio Restaurant Group’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Bravo Brio Restaurant Group’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other consumer discretionary stocks instead? Use our free playform to see my list of over 100 other consumer discretionary companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.