Chuy’s Holdings Inc Valuation – July 2018 $CHUY

Company Profile (excerpt from Reuters): Chuy’s Holdings, Inc., incorporated on October 16, 2006, operates Chuy’s, a restaurant concept offering a distinct menu of authentic, freshly prepared Mexican and Tex-Mex inspired food. As of December 25, 2016, the Company operated 80 Chuy’s restaurants across 16 states. The Company offers the same menu during lunch and dinner, which includes enchiladas, fajitas, tacos, burritos, combination platters and daily specials, complemented by a range of appetizers, soups and salads.


Downloadable PDF version of this valuation:

ModernGraham Valuation of CHUY – July 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $544,052,754 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.87 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -122.50% Fail
6. Moderate PEmg Ratio PEmg < 20 27.67 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.91 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.87 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $1.17
MG Growth Estimate 15.00%
MG Value $45.15
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $17.00
MG Value based on 0% Growth $9.97
Market Implied Growth Rate 9.59%
Current Price $32.45
% of Intrinsic Value 71.88%

Chuy’s Holdings Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-0.64 in 2014 to an estimated $1.17 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.59% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Chuy’s Holdings Inc revealed the company was trading above its Graham Number of $16.63. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 27.67, which was below the industry average of 30.09, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.64.

Chuy’s Holdings Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.64
Graham Number $16.63
PEmg 27.67
Current Ratio 0.87
PB Ratio 2.91
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $21,462,000
Total Current Liabilities $24,579,000
Long-Term Debt $0
Total Assets $274,253,000
Intangible Assets $48,163,000
Total Liabilities $83,643,000
Shares Outstanding (Diluted Average) 17,069,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $1.10
Dec2017 $1.70
Dec2016 $1.02
Dec2015 $0.77
Dec2014 $0.69
Dec2013 $0.66
Dec2012 $0.37
Dec2011 $0.20
Dec2010 -$17.18

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.17
Dec2017 $1.13
Dec2016 $0.80
Dec2015 $0.64
Dec2014 -$0.64
Dec2013 -$1.93
Dec2012 -$3.26
Dec2011 -$4.51
Dec2010 -$5.73

Recommended Reading:

Other ModernGraham posts about the company

Chuy’s Holdings Inc Valuation – Initial Coverage $CHUY

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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