Intrinsic Value Good Times Restaurants Inc. (GTIM)

• Previous Close: $1.16
• Intrinsic Value: $1.06
• Upside potential: -9%

Stock Valuation Context

Business Model And Market Position

Good Times Restaurants Inc. operates in the highly competitive quick-service restaurant (QSR) industry, primarily through its two brands: Good Times Burgers & Frozen Custard and Bad Daddy’s Burger Bar. The company generates revenue through company-owned restaurants and limited franchising, focusing on premium-quality burgers, custard, and craft beer offerings. Its dual-brand strategy allows it to cater to both value-conscious customers (Good Times) and the premium casual dining segment (Bad Daddy’s). The company operates predominantly in the Western and Southeastern U.S., competing with national chains and regional players. Good Times emphasizes fresh, high-quality ingredients and a differentiated customer experience to carve out a niche in the crowded burger market. While its footprint is modest compared to industry giants, the company’s focus on operational efficiency and localized marketing helps sustain its market position. The QSR sector remains highly fragmented, but Good Times’ ability to balance affordability with premium offerings provides a distinct competitive edge.

Revenue Profitability And Efficiency

Good Times reported revenue of $142.3 million for FY 2024, with net income of $1.6 million, reflecting a net margin of approximately 1.1%. Diluted EPS stood at $0.14. Operating cash flow was $5.1 million, while capital expenditures totaled $3.1 million, indicating moderate reinvestment in operations. The company’s ability to generate positive net income despite industry headwinds suggests disciplined cost management.

Earnings Power And Capital Efficiency

The company’s earnings power is constrained by its modest scale and competitive industry dynamics. Operating cash flow of $5.1 million underscores its ability to fund operations, but capital expenditures consume a significant portion, limiting free cash flow. The diluted EPS of $0.14 reflects moderate profitability, with room for improvement through operational leverage or expansion.

Balance Sheet And Financial Health

Good Times holds $3.9 million in cash and equivalents against total debt of $44.4 million, indicating a leveraged balance sheet. The debt-to-equity ratio appears elevated, though the company’s ability to service debt is supported by positive operating cash flow. Shareholders’ equity is likely modest given the debt load, warranting close monitoring of liquidity and refinancing risks.

Growth Trends And Dividend Policy

Revenue growth trends are not explicitly provided, but the absence of dividends suggests a focus on reinvestment. The company’s capital expenditures indicate ongoing investment in its restaurant base, though expansion appears measured. Without dividend payouts, retained earnings are presumably directed toward debt reduction or growth initiatives.

Valuation And Market Expectations

With a market cap derived from 11.0 million shares outstanding and a trailing EPS of $0.14, the P/E ratio would depend on the current stock price. Investors likely weigh the company’s niche positioning against its leveraged balance sheet and competitive pressures. Valuation multiples may reflect skepticism about scalability in the saturated QSR market.

Strategic Advantages And Outlook

Good Times’ dual-brand strategy and focus on quality ingredients provide differentiation, but its small scale and debt burden pose challenges. The outlook hinges on operational efficiency, same-store sales growth, and prudent capital allocation. Success in expanding margins or reducing leverage could improve investor sentiment, though macroeconomic factors and consumer spending trends remain key risks.

Sources

Company filings (10-K), CIK 0000825324