Is Chanticleer Holdings Inc (NASDAQ:BURG) A Consumer Sector Leader?
Chanticleer Holdings Inc (NASDAQ:BURG), a USD$9.50M small-cap, operates in the consumer discretionary industry, whose sales are driven primarily by consumer sentiment and access to capital. These macro factors tend to determine the rate at which consumers purchase leisure products. Consumer discretionary analysts are forecasting for the entire industry, a strong double-digit growth of 13.00% in the upcoming year , and a strong near-term growth of 15.59% 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 Chanticleer Holdings is lagging or leading in the industry. View our latest analysis for Chanticleer Holdings
What’s the catalyst for Chanticleer Holdings’s sector growth?
Although there is higher competition for consumer leisure time, due to the rise of new activities such as online streaming and mobile games, the whole industry has been expanding in various channels to better interact with its consumer. Traditional incumbents are forced to adapt or fall behind. In the previous year, the industry saw growth in the teens, beating the US market growth of 10.76%. Chanticleer Holdings lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Chanticleer Holdings may be trading cheaper than its peers.
Is Chanticleer Holdings and the sector relatively cheap?
The leisure industry is trading at a PE ratio of 25x, in-line with the US stock market PE of 20x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 10.90% on equities compared to the market’s 10.46%. Since Chanticleer Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Chanticleer Holdings’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Chanticleer Holdings has been a leisure industry laggard in the past year. If your initial investment thesis is around the growth prospects of Chanticleer Holdings, there are other leisure companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Chanticleer Holdings fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If Chanticleer Holdings 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 Chanticleer Holdings’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Chanticleer Holdings’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.
