On Thursday, Roth/MKM adjusted its outlook on GEN Restaurant Group (NASDAQ: GENK), reducing the price target to $12 from the previous $14 while reaffirming a Buy rating on the stock.
The revision follows the company's second-quarter results, which surpassed both the firm's estimates and the consensus. However, the updated full-year 2024 revenue guidance suggests a softer comparable sales performance in the second half of the year.
GEN Restaurant Group's recent earnings report indicated that, despite outperforming expectations, the company is not immune to the broader economic challenges that have impacted traffic across the industry.
The firm noted that while consumer visitation remains a concern, GENK's business model at the individual unit level continues to be attractive, and the company's expansion plans are still on track.
The analyst from Roth/MKM highlighted the strength of GENK's underlying business, pointing out that the company's growth potential is supported by a robust pipeline that could significantly increase its base of operating units.
In terms of financial guidance, GENK's management has indicated that the latter half of 2024 might witness a deceleration in comparable sales, a key metric for the restaurant industry that compares the performance of established locations over a certain period.
InvestingPro Insights
As GEN Restaurant Group (NASDAQ:GENK) navigates the latter half of 2024 with a cautious outlook on comparable sales, it's essential to consider the financial health and market performance of the company. InvestingPro data shows GENK's market capitalization stands at $280.25 million, with a notable price-to-earnings (P/E) ratio of 7.44. Despite this relatively low P/E ratio, the company's adjusted P/E ratio for the last twelve months as of Q1 2024 reflects a negative figure of -19.08, underscoring the challenges it has faced in profitability.
Moreover, GENK's price-to-book ratio for the same period is at a high 31.61, which may raise concerns about the stock's valuation. On the upside, the company has experienced a revenue growth of 10.96% over the last twelve months, suggesting some positive momentum in sales. However, InvestingPro Tips highlight that GENK's gross profit margin remains weak at 17.56%, and analysts have recently revised their earnings expectations downwards for the upcoming period. This aligns with the cautious stance taken by Roth/MKM in their revised price target.
Investors should also note that GENK has seen a significant return over the last week, with a 10.19% increase, but the one-year price total return paints a starkly different picture, showing a decline of 56.31%. These mixed signals in market performance underscore the importance of staying informed about the latest analyst predictions and financial metrics. For those interested in a deeper dive, InvestingPro offers additional tips on GENK, available at https://www.investing.com/pro/GENK.
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