Last update on 2024-06-07

Red Robin Gourmet Burgers (RRGB) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Piotroski F-Score Analysis of Red Robin Gourmet Burgers (RRGB) for 2023 reveals a score of 4/9, indicating potential investment risks and areas for improvement.

Short Analysis - Piotroski Score: 4

We're running Red Robin Gourmet Burgers (RRGB) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a tool that rates a company's financial health on a scale from 0 to 9. Red Robin Gourmet Burgers (RRGB) scored a 4 based on this scale. The analysis breaks down into three major areas: profitability, liquidity, and operating efficiency. Profitability measures like net income and cash flow are poor, showing large negative numbers, though there is some minor improvement in Return on Assets (ROA) and cash conversion. Liquidity metrics like leverage ratio and current ratio are also concerning, indicating a high reliance on debts and low ability to cover short-term obligations. However, the company has reduced its number of shares, positively impacting shareholder value. In terms of operating efficiency, asset turnover improved, but gross margin decreased, showing mixed performance in managing costs and generating sales amount from assets.

Insights for Value Investors Seeking Stable Income

Considering the current financials of Red Robin Gourmet Burgers (RRGB), with a Piotroski F-Score of 4, it sparks some concern for investors. The company struggles with profitability and liquidity, though there are a few signs of operational improvement. If you are a risk-averse investor, it might be better to avoid this stock due to its financial instability and high debt levels. However, if you're an adventurous investor eyeing potential turnaround stories, you could monitor the company's efforts to improve its financial health for future investment opportunities. Overall, proceeding with caution is advised.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Red Robin Gourmet Burgers (RRGB)

Company has a positive net income?

Net income represents a company's total earnings, deducting all expenses and taxes. This metric is crucial because it indicates profitability.

In 2023, Red Robin Gourmet Burgers reported a net income of -$21,228,000. This negative net income indicates that the company incurred a loss rather than a profit. Reflecting on the historical data of net income over the past 20 years reveals a concerning trend; after numerous years of positive earnings, often exceeding $20 million, the company began to experience negative net income from 2018 onward. Significant losses began in 2020 with a profound drop to -$276 million, likely attributable to the COVID-19 pandemic, and seemed to persist with -$50.44 million in 2021 and -$78.88 million in 2022. As of 2023, the lone improvement is the narrowing of losses. Given that the net income is negative for the current year, the score for this Piotroski criterion is 0.

Company has a positive cash flow?

Cash Flow from Operations (CFO) evaluates the money a company generates from its core business activities, crucial for assessing operational health.

In 2023, Red Robin Gourmet Burgers (RRGB) reported a negative Cash Flow from Operations (CFO) of -$1,157,000. This stands in stark contrast to previous years, where the company had generally positive CFOs, often in the range of tens of millions. For example, in 2019 and 2018, the CFOs were $57,915,000 and $126,295,000 respectively. This trend indicates a significant decline in the company's ability to generate cash from its operational activities, warranting close scrutiny for underlying issues. Consequently, this criterion scores 0 points.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is a measure of the change in how effectively a company uses its assets over time to generate earnings.

Comparing the Return on Assets (ROA) of Red Robin Gourmet Burgers (RRGB) in 2023 at -0.027 with that of 2022, which stood at -0.0896, we ascertain a noteworthy improvement in financial performance. The change in ROA indeed increased, translating to a 1-point addition in this criterion of the Piotroski Analysis. A less negative ROA suggests better profitability relative to asset base utilization, a positive trend for the company's operations, especially in an industry with a median ROA substantially higher than RRGB's. The industry median ROA was 0.3206 in 2023, showcasing a significant gap, but the upwards movement in RRGB's ROA is a signal of improving efficiency and perhaps strategic realignments or cost management initiatives that are starting to take effect.

Operating Cashflow are higher than Netincome?

The criterion compares the operating cash flow to net income, which aids in understanding the company's ability to convert net income into cash. Higher cash flow is a healthier sign.

In 2023, Red Robin Gourmet Burgers reported an operating cash flow of -$1,157,000 and a net income of -$21,228,000. The operating cash flow being higher than the net income indicates that the company is better at converting net income into cash despite facing losses. This is crucial because it reflects the underlying cash-generating efficiency of the company's operations, even in challenging times. Based on this data, Red Robin will be awarded 1 point according to the Piotroski criteria.

Liquidity of Red Robin Gourmet Burgers (RRGB)

Leverage is declining?

Change in leverage shows how effectively a company uses debt to finance its operations. Lower leverage is generally better as it indicates less reliance on borrowed capital.

Red Robin Gourmet Burgers (RRGB) has seen its leverage ratio increase from 0.7166 in 2022 to 0.7629 in 2023. This trend is concerning as higher leverage implies greater dependency on debt, heightening financial risk. Additionally, compared to prior years, the leverage has been on an upward trajectory since 2014, where it was 0.1894. The consistent rise indicates an increasing reliance on borrowed funds, which exposes the company to higher interest costs and financial strain. Thus, according to the Piotroski analysis, no point is awarded for this criterion.

Current Ratio is growing?

The current ratio assesses a company's ability to pay off its short-term liabilities with its short-term assets.

Examining Red Robin Gourmet Burgers (RRGB) reveals that the current ratio has decreased from 0.543 in 2022 to 0.4926 in 2023. Consequently, RRGB fails to meet the criteria, resulting in no score for this metric. Furthermore, when juxtaposed with the industry median, which stands at 0.777 in 2023, it's evident that RRGB's current ratio is considerably lower, underscoring a potential liquidity concern. To provide a comprehensive perspective, the 20-year historical chart demonstrates that RRGB's current ratio, while fluctuating, has often lagged behind industry standards.

Number of shares not diluted?

Change in Shares Outstanding reflects the company's decision regarding equity financing. A decrease indicates share buybacks, enhancing shareholder value.

In 2022, Red Robin Gourmet Burgers had 15,840,000 shares outstanding, which decreased significantly to 0 in 2023. Historically, the company has fluctuated its share count, but this drastic drop indicates a substantial buyback or equity restructuring. A buyback could be seen as a positive move to return value to investors, particularly when the shares are perceived undervalued. However, if the reduction to zero signifies other corporate actions like delisting or moving to private, it might convey different circumstances. Given this data, 1 point is assigned for the decrease, enhancing the Piotroski score favorably.

Operating of Red Robin Gourmet Burgers (RRGB)

Cross Margin is growing?

This criterion evaluates the change in gross margin from the previous year, which indicates the company's efficiency in managing production costs relative to its revenue.

In 2023, Red Robin Gourmet Burgers (RRGB) reported a gross margin of 0.3206 compared to 0.3316 in 2022. Hence, there was a decrease in the gross margin, resulting in 0 points for this criterion. Historically, gross margins for RRGB have shown volatility, peaking at 0.6322 in 2004 and dropping to 0.1976 in 2008. Comparatively, the industry median gross margin in 2023 is also 0.3206, representing a somewhat competitive position but indicating possible industry-wide challenges in margin management. The decrease in 2023 suggests pressure on cost management.

Asset Turnover Ratio is growing?

The asset turnover ratio measures a company's ability to generate sales from its assets. A higher ratio indicates better performance.

The asset turnover for Red Robin Gourmet Burgers (RRGB) has increased from 1.4372 in 2022 to 1.6556 in 2023. This increase signifies improved efficiency in utilizing assets to generate revenue, reflecting positively on operational performance. Historically, RRGB's asset turnover fell notably during 2019 and 2020, potentially due to pandemic-related impacts, with recovery evident in subsequent years. This positive trend is encouraging for stakeholders and garners a score of 1 for this criterion.