Meritage Hospitality Group (MHGU) AI Stock Analysis

• Market Cap: $79.74M
• Dividend Yield: N/A
• Average Volume (3M): 184.00
• Price to Earnings (P/E): 58.3
• Beta (1Y): -0.02
• Revenue Growth: -2.53%
• EPS Growth: -66.89%
• Country: US
• Employees: 330
• Sector: Consumer Cyclical
• Sector Strength: 68
• Industry: Restaurants
• EPS (TTM): -0.51
• Shares Outstanding: 6,291,000
• 10 Day Avg. Volume: 92
• 30 Day Avg. Volume: 184
• PEG Ratio: -0.41
• Price to Book (P/B): 0.64
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -4.82
• Enterprise Value/Market Cap: 8.27
• Enterprise Value/Revenue: 0.25
• Enterprise Value/Gross Profit: 5.23
• Enterprise Value/Ebitda: 4.24
• 1Y Price Target: $13.00
• Price Target Upside: 0.08% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 0

• Rating: 48 Neutral
• Price Target: $12.50 ▼(-3.77%Downside)

The overall stock score reflects significant financial performance challenges, highlighted by high leverage and negative free cash flow. Technical analysis indicates bearish momentum, and valuation metrics suggest the stock may be overvalued. These factors collectively weigh down the score.

Meritage Hospitality Group Business Overview & Revenue Model

Company Description

Meritage Hospitality Group Inc. operates quick-service and casual dining restaurants. The company operates restaurants under the Wendy's, Morning Belle, Stan's Tacos, Freighters Eatery & Taproom, and Twisted Roosters brand names. As of January 2, 2022, it operated 337 restaurants in Arkansas, Connecticut, Florida, Georgia, Indiana, Massachusetts, Michigan, Missouri, Mississippi, North Carolina, South Carolina, Ohio, Oklahoma, Tennessee, Texas, and Virginia. The company was formerly known as Thomas Edison Inns, Inc. and changed its name to Meritage Hospitality Group Inc. in May 1996. Meritage Hospitality Group Inc. was incorporated in 1986 and is headquartered in Grand Rapids, Michigan.

How the Company Makes Money

Meritage Hospitality Group makes money primarily through the ownership and operation of restaurants. As a major franchisee of Wendy's, the company generates revenue from the sale of food and beverages at its numerous Wendy's locations across the United States. Additionally, Meritage operates its own proprietary brands, which contribute to its earnings through direct sales in its restaurants. The company's revenue streams are bolstered by its strategic location choices, efficient operational practices, and marketing efforts to attract and retain customers. Significant factors contributing to its earnings include its robust franchise agreements with Wendy's, investment in restaurant development and renovations, and the ability to leverage economies of scale in purchasing and operations.

Meritage Hospitality Group Financial Statement Overview

Summary

Meritage Hospitality Group exhibits strong gross profit margins and cash generation from operations. However, high leverage, low net profit margins, and negative free cash flow present financial challenges that could impact stability and growth.

Income Statement

Meritage Hospitality Group shows a mixed performance in its income statement. The gross profit margin for 2024 is approximately 41.5%, which is strong for the restaurant industry, indicating effective cost management. However, the net profit margin is relatively low at about 1.2%, reflecting challenges in converting revenue into profit. Revenue growth has been inconsistent, with a slight decline from 2023 to 2024. The EBIT and EBITDA margins are also modest, suggesting room for operational improvements.

Balance Sheet

The balance sheet reveals a high debt-to-equity ratio of 4.69 in 2024, indicating significant leverage and potential financial risk. The return on equity is modest at 6.11%, suggesting moderate efficiency in generating profits from equity. The equity ratio stands at 15.76%, reflecting a relatively low proportion of equity financing, which may limit financial flexibility.

Cash Flow

Cash flow analysis shows challenges, with a negative free cash flow in 2024, although there is improvement from the previous year. The operating cash flow to net income ratio is 2.96, indicating strong cash generation relative to net income. However, the free cash flow to net income ratio is negative, highlighting issues in covering capital expenditures with operating cash flow.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	668.80M	672.49M	626.04M	577.13M	516.18M
Gross Profit	277.53M	80.89M	252.19M	242.96M	228.65M
EBITDA	37.55M	41.67M	35.25M	47.35M	44.84M
Net Income	7.80M	6.14M	8.48M	17.45M	14.91M
Balance Sheet
Total Assets	810.16M	816.90M	791.32M	758.63M	689.93M
Cash, Cash Equivalents and Short-Term Investments	20.85M	19.43M	35.37M	49.95M	32.32M
Total Debt	598.53M	615.94M	586.15M	567.88M	521.80M
Total Liabilities	681.35M	694.87M	674.12M	649.95M	591.51M
Stockholders Equity	127.67M	121.14M	116.15M	105.76M	95.80M
Cash Flow
Free Cash Flow	-16.98M	-33.90M	-41.02M	-45.53M	2.52M
Operating Cash Flow	23.12M	11.46M	25.75M	38.58M	36.34M
Investing Cash Flow	-32.24M	-74.83M	-83.24M	-83.27M	-32.47M
Financing Cash Flow	10.53M	47.44M	42.91M	62.32M	11.51M

Meritage Hospitality Group Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 12.99
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MHGU, the sentiment is Negative. The current price of 12.99 is above the 20-day moving average (MA) of 12.79, above the 50-day MA of 12.92, and below the 200-day MA of 13.96, indicating a bearish trend. The MACD of -0.06 indicates Positive momentum. The RSI at 46.91 is Neutral, neither overbought nor oversold. The STOCH value of 29.16 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MHGU.

Meritage Hospitality Group Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
BDL	75 Outperform	$56.50M	13.95	6.48%	1.72%	9.38%	14.76%
Sector *	61 Neutral	$16.08B	9.94	-8.64%	3.35%	1.36%	-20.44%
RRGB	50 Neutral	$103.05M	―	92.02%	―	-1.68%	-140.83%
THCH	49 Neutral	$90.95M	―		―	-14.11%	54.77%
MHGU	48 Neutral	$79.74M	58.30	1.83%	―	-2.53%	-66.89%
FAT	45 Neutral	$39.98M	―	38.50%	136.65%	0.96%	-57.29%
STKS	42 Neutral	$92.40M	―	-9.31%	―	138.50%	-60576.19%