The 1 Metric to Watch During Restaurant Earnings Season
As this latest earnings season begins, evaluating how various companies are dealing with the fallout from the coronavirus pandemic will be a priority. Concerns about spreading the disease have led to widespread stay-at-home orders, making the evaluation of restaurant companies on traditional metrics like total sales, same-store sales, and operating margin quite difficult.
This data won't really tell investors much about the company's real economic viability as it is likely they all have seen a marked decrease in volume in the last two months, despite the fact that several have continued to operate in some form. With a likely sharp drop in sales, year-over-year profitability and cash flow are not useful indicators right now.
The stocks for these companies have been hard hit recently, particularly casual dining establishments. But it is important to examine restaurants' earnings, even in these difficult times, to help track your investment or as part of your evaluation on possibly starting a new one. Fortunately, there is at least one metric that can help you figure out a restaurant company's sustainability and future growth prospects.
Source Fool.com
