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Denny's Inc. (DENN)
:DENN

Denny's (DENN) AI Stock Analysis

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Denny's

(NASDAQ:DENN)

Rating:63Neutral
Price Target:
$5.00
▲(7.30%Upside)
The overall stock score for Denny's is 63, driven mainly by the mixed financial performance and the moderately positive technical outlook. While operational efficiencies and technical indicators are strengths, the high leverage and stagnant growth represent significant risks. The reasonable valuation provides some stability, but the absence of dividends and cautious earnings guidance suggest a need for cautious optimism.
Positive Factors
Customer Growth
The value offerings, including promotions like Buy One Slam Get One for $1, attracted new and lapsed customers, expanding Denny's customer base.
Revenue Performance
Denny’s reported operating results that beat revenue consensus, indicating strong performance in the market.
Negative Factors
Franchisee Growth
The path forward with Keke’s experienced disruption with the dissolution of franchisee agreements, impacting the franchisee pipeline growth.
Profit Margins
Higher commodity costs and inefficiency costs from new units pressured Denny's profit margins.

Denny's (DENN) vs. SPDR S&P 500 ETF (SPY)

Denny's Business Overview & Revenue Model

Company DescriptionDenny's Corporation, through its subsidiary, Denny's, Inc., owns and operates full-service restaurant chains under the Denny's brand. As of December 29, 2021, it had 1,640 franchised, licensed, and company restaurants worldwide. The company was formerly known as Advantica Restaurant Group, Inc. and changed its name to Denny's Corporation in 2002. Denny's Corporation was founded in 1953 and is based in Spartanburg, South Carolina.
How the Company Makes MoneyDenny's makes money primarily through the operation and franchising of its restaurants. The company's revenue model is built on two main streams: company-operated restaurants and franchised restaurants. Revenue from company-operated restaurants is generated directly from sales of food and beverages to customers. In contrast, franchised restaurants contribute to revenue through franchise fees, which include initial franchise fees, royalties based on a percentage of sales, and other related income. Denny's also benefits from strategic partnerships and marketing initiatives that enhance brand visibility and drive traffic to its locations, thereby increasing sales. The combination of company-owned and franchised locations allows Denny's to expand its footprint while managing operational costs effectively.

Denny's Earnings Call Summary

Earnings Call Date:May 05, 2025
(Q1-2025)
|
% Change Since: 22.96%|
Next Earnings Date:Aug 05, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted successful promotional strategies and growth in the Keke's Breakfast Cafe and digital efforts, but also noted challenges such as declining same-restaurant sales and macroeconomic pressures impacting consumer spending and commodity costs. The sentiment reflects cautious optimism amidst a challenging environment.
Q1-2025 Updates
Positive Updates
Promotional Success with BOGO Offer
The Buy One Slam Get One for $1 deal successfully drove traffic, with nearly 70% of transactions from lapsed or new customers. April same-restaurant sales improved to approximately flat.
Keke's Breakfast Cafe Performance
Keke's Breakfast Cafe reported a 3.9% increase in same-restaurant sales for the first quarter and significantly outperformed the BBI Family Dining Index in Florida by nearly 400 basis points.
Digital and Off-Premise Growth
Off-premise sales contributed a 1% improvement in same-restaurant sales during Q1, now representing a 22% mix. Digital enhancements improved conversion rates by over 16%.
Brand Partnerships and Awareness
Collaboration with NVIDIA increased brand awareness, with the Instagram post becoming Denny's top-performing content by impressions in the past 16 months.
Negative Updates
Decline in Same-Restaurant Sales
Denny's experienced a 3% decrease in same-restaurant sales, with domestic franchise restaurants reporting a decline of 3.2%.
Impact of Macro Pressures
Macroeconomic challenges, including inflation and a negative consumer sentiment, affected spending and resulted in a competitive value-driven environment.
Higher Commodity Costs
Significant increase in egg prices, due to avian flu, impacted margins with egg costs doubling. This led to a temporary surcharge on meals including eggs.
Closure of Underperforming Restaurants
Denny's closed 14 franchise restaurants with average unit volumes of approximately $1 million as part of a strategy to close underperforming locations.
Company Guidance
During Denny's Corporation's Q1 2025 earnings call, the company provided guidance pointing towards the lower half of their same-restaurant sales guidance range of negative 2% to positive 1% for the year, influenced by macroeconomic challenges, including consumer sentiment and inflation. The company reported a 3% decrease in Denny's same-restaurant sales for the quarter, with domestic franchise restaurants at negative 3.2% and company-owned restaurants at negative 0.9%. Despite these challenges, April's same-restaurant sales were approximately flat, driven by a successful promotional offer, "Buy One Slam Get One for $1," which attracted nearly 70% lapsed or new customers. Off-premise sales contributed a 1% improvement in same-restaurant sales, representing a 22% mix from off-premise channels. Keke's Breakfast Cafe showed positive momentum, with a 3.9% increase in same-restaurant sales. The company adjusted its commodities expectations to 3-5% and maintained its G&A guidance of $80 million to $85 million, aiming at a lower end of its adjusted EBITDA guidance of $80 million to $85 million due to higher commodity costs and a cautious consumer environment.

Denny's Financial Statement Overview

Summary
Denny's shows solid gross margins and strong cash generation relative to net income but faces challenges with high leverage, negative equity, and stagnant revenue growth. Improving net profitability and strengthening the balance sheet are crucial for long-term viability.
Income Statement
65
Positive
Denny's has shown a mixed performance in their income statement. The TTM Gross Profit Margin is approximately 41.29%, which is healthy for the restaurant industry, indicating effective cost management. However, the Net Profit Margin for the TTM is notably low at 3.79%, suggesting thin net profitability. The Revenue Growth Rate from the previous annual report to TTM is approximately 0.37%, indicating stagnant revenue growth. The EBIT and EBITDA margins are also modest at 9.27% and 13.46% respectively, reflecting moderate operating efficiency. Overall, while the company maintains decent gross margins, net profitability and growth remain areas for improvement.
Balance Sheet
40
Negative
Denny's balance sheet reveals significant challenges. The Debt-to-Equity Ratio is negative due to negative stockholders' equity, highlighting a high leverage situation. This is a potential risk factor as it indicates financial instability. The Return on Equity (ROE) is not calculable due to negative equity, complicating profitability assessments. The Equity Ratio is also negative, signifying that liabilities exceed assets. These metrics point to a highly leveraged and precarious financial position that could impact long-term stability.
Cash Flow
55
Neutral
Cash flow analysis shows some positive aspects amidst challenges. The Operating Cash Flow to Net Income Ratio is a strong 1.99, indicating robust cash generation relative to net income. However, Free Cash Flow Growth Rate from the last annual report to TTM is approximately 66.01%, suggesting volatility in cash flow management. The Free Cash Flow to Net Income Ratio is 0.09, which is quite low, indicating that a minimal portion of earnings is translating into free cash flow. While operational cash flow strength is a positive, overall cash flow management requires consistency.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue454.00M452.33M463.92M456.43M398.17M288.61M
Gross Profit187.43M332.11M153.87M141.64M142.10M79.69M
EBITDA61.11M62.08M63.77M78.80M75.55M25.15M
Net Income17.21M21.57M19.95M74.71M78.07M-5.12M
Balance Sheet
Total Assets488.07M496.27M464.82M498.33M435.53M430.95M
Cash, Cash Equivalents and Short-Term Investments1.04M2.80M6.17M5.27M33.17M6.16M
Total Debt415.45M408.20M395.26M411.45M324.82M379.76M
Total Liabilities438.19M530.30M527.50M535.45M500.79M561.39M
Stockholders Equity-36.42M-34.02M-62.69M-37.12M-65.27M-130.45M
Cash Flow
Free Cash Flow1.52M918.00K62.15M27.61M68.82M-10.10M
Operating Cash Flow34.29M29.49M72.13M39.45M76.17M-3.14M
Investing Cash Flow-28.52M-26.67M-7.56M-86.60M29.01M4.65M
Financing Cash Flow-5.89M-6.01M-63.19M20.04M-78.45M-994.00K

Denny's Technical Analysis

Technical Analysis Sentiment
Positive
Last Price4.66
Price Trends
50DMA
4.03
Positive
100DMA
4.14
Positive
200DMA
5.24
Negative
Market Momentum
MACD
0.10
Negative
RSI
67.09
Neutral
STOCH
75.68
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DENN, the sentiment is Positive. The current price of 4.66 is above the 20-day moving average (MA) of 4.18, above the 50-day MA of 4.03, and below the 200-day MA of 5.24, indicating a neutral trend. The MACD of 0.10 indicates Negative momentum. The RSI at 67.09 is Neutral, neither overbought nor oversold. The STOCH value of 75.68 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DENN.

Denny's Risk Analysis

Denny's disclosed 21 risk factors in its most recent earnings report. Denny's reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Denny's Peers Comparison

Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
76
Outperform
$376.25M8.90117.47%-3.96%1036.87%
74
Outperform
$3.15B20.0046.60%1.70%4.42%48.23%
71
Outperform
$1.44B25.0712.90%1.55%2.84%-4.44%
70
Neutral
$1.03B49.826.01%2.91%-4.86%
63
Neutral
$238.83M14.18-63.40%-0.53%-24.19%
62
Neutral
$16.76B11.38-7.38%2.96%1.59%-23.30%
40
Underperform
$32.63M-978.37%-0.61%-200.32%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
DENN
Denny's
4.66
-1.87
-28.64%
BJRI
BJ's Restaurants
46.78
10.45
28.76%
CBRL
Cracker Barrel
67.93
29.39
76.26%
CAKE
Cheesecake Factory
65.27
28.61
78.04%
NDLS
Noodles & Co
0.71
-0.85
-54.49%
PBPB
Potbelly
12.51
5.08
68.37%

Denny's Corporate Events

Executive/Board ChangesShareholder Meetings
Denny’s Stockholders Approve Omnibus Incentive Plan
Neutral
May 16, 2025

At the Annual Meeting of Stockholders on May 14, 2025, Denny’s Corporation’s stockholders approved the Amended and Restated 2021 Omnibus Incentive Plan, which was previously adopted by the Board of Directors. Additionally, the meeting saw the election of seven directors, ratification of KPMG LLP as the independent auditor for 2025, approval of executive compensation, and rejection of a proposal to allow shareholders with at least 15% of stock to call special meetings.

The most recent analyst rating on (DENN) stock is a Buy with a $7.00 price target. To see the full list of analyst forecasts on Denny’s stock, see the DENN Stock Forecast page.

Business Operations and StrategyFinancial Disclosures
Denny’s Reports Q1 2025 Results Amid Challenges
Neutral
May 5, 2025

Denny’s Corporation reported its first-quarter 2025 results, highlighting challenges due to macroeconomic conditions. The company saw a slight increase in total operating revenue to $111.6 million, despite a decline in Denny’s same-restaurant sales by 3.0%. Keke’s, however, showed growth with a 3.9% increase in sales and expansion into Georgia. Operating income fell to $5.2 million from $10.0 million the previous year, with net income at $0.3 million. The company invested in new cafes and remodels, and despite the challenges, remains committed to strategic initiatives and expanding its market presence.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 02, 2025