Meritage Hospitality Group (MHGU) AI Stock Analysis

• Market Cap: $13.91M
• Dividend Yield: N/A
• Average Volume (3M): 7.04K
• Price to Earnings (P/E): ―
• Beta (1Y): -0.20
• Revenue Growth: -3.97%
• EPS Growth: -500.13%
• Country: US
• Employees: 330
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Restaurants
• EPS (TTM): -1.40
• Shares Outstanding: 6,291,000
• 10 Day Avg. Volume: 16,325
• 30 Day Avg. Volume: 7,036
• PEG Ratio: 0.65
• Price to Book (P/B): 0.72
• Price to Sales (P/S): 0.14
• P/FCF Ratio: -5.44
• Enterprise Value/Market Cap: 45.76
• Enterprise Value/Revenue: 0.99
• Enterprise Value/Gross Profit: 3.10
• Enterprise Value/Ebitda: 37.58
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 40 Underperform
• Price Target: $2.00 ▼(-51.46% Downside)

The score is driven primarily by weak financial performance (declining revenue, margin compression, losses, high leverage, and poor cash conversion). Technicals add further downside risk with a strong downtrend, despite oversold readings that may allow a short-term bounce. Valuation is also unattractive due to the negative P/E and lack of dividend support.

Positive Factors

Franchise Network Expansion

Expanding the franchise network with established brands can drive long-term revenue growth and enhance market presence, leveraging brand recognition and operational efficiencies.

Strategic Partnerships

Strategic partnerships and acquisitions can provide access to new markets and technologies, fostering innovation and competitive advantage in the evolving foodservice industry.

Revenue Streams

Diverse revenue streams from direct sales and franchise operations provide financial stability, reducing reliance on a single income source and enhancing resilience against market fluctuations.

Negative Factors

Declining Revenue

A declining revenue trend indicates challenges in maintaining sales growth, which may affect long-term profitability and market competitiveness if not addressed.

High Leverage

High leverage increases financial risk and limits flexibility, potentially impacting the company's ability to invest in growth opportunities or weather economic downturns.

Margin Compression

Significant margin compression suggests rising costs or pricing pressures, which can erode profitability and hinder the company's ability to invest in future growth.

Meritage Hospitality Group Business Overview & Revenue Model

Company Description

Meritage Hospitality Group (MHGU) is a leading restaurant and hospitality company primarily engaged in the operation and management of fast-casual dining restaurants. The company focuses on franchise opportunities with well-known brands, particularly in the burger and pizza segments, providing high-quality food and exceptional customer service. MHGU operates both company-owned and franchised locations across multiple states, emphasizing growth through strategic partnerships and acquisitions within the foodservice industry.

How the Company Makes Money

Meritage Hospitality Group generates revenue primarily through the operation of its restaurants, which includes both company-owned and franchised locations. The company earns money from direct sales of food and beverages to customers, leveraging its menu offerings to attract a diverse clientele. Additionally, MHGU receives franchise fees and ongoing royalties from franchisees, which contribute to its revenue stream. The company may also benefit from partnerships with suppliers, enabling cost efficiencies and profit-sharing arrangements. Overall, MHGU's financial success is driven by its ability to maintain high restaurant performance while expanding its franchise network and enhancing brand recognition.

Meritage Hospitality Group Financial Statement Overview

Summary

Weak fundamentals: revenue is declining (-1.57% TTM), profitability has deteriorated sharply (gross margin down to 25.03% TTM from 41.50% in 2024) and net margin is negative. Balance sheet leverage is high (debt-to-equity 4.77) with negative ROE, and cash generation is strained (FCF growth -9.31% TTM; operating cash flow to net income 0.10).

Income Statement

The income statement shows declining revenue with a negative growth rate of -1.57% in TTM. Gross profit margin has decreased significantly from 41.50% in 2024 to 25.03% in TTM, indicating pressure on profitability. The net profit margin has turned negative, reflecting a loss in the current period. EBIT and EBITDA margins have also declined, highlighting operational challenges.

Balance Sheet

The balance sheet reveals high leverage with a debt-to-equity ratio of 4.77 in TTM, indicating significant reliance on debt financing. Return on equity has turned negative, suggesting inefficiencies in generating returns for shareholders. The equity ratio remains low, reflecting a higher proportion of debt in the capital structure.

Cash Flow

Cash flow analysis shows negative free cash flow growth of -9.31% in TTM, indicating cash flow challenges. The operating cash flow to net income ratio is low at 0.10, suggesting weak cash generation relative to earnings. Free cash flow to net income ratio is negative, highlighting cash flow difficulties.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	641.39M	668.80M	672.49M	626.04M	577.13M	516.18M
Gross Profit	205.25M	277.53M	80.89M	252.19M	242.96M	228.65M
EBITDA	16.94M	37.55M	41.16M	39.04M	47.35M	44.84M
Net Income	-8.25M	7.80M	6.14M	8.48M	17.45M	14.91M
Balance Sheet
Total Assets	771.89M	810.16M	816.90M	791.32M	758.63M	689.93M
Cash, Cash Equivalents and Short-Term Investments	12.12M	20.85M	19.43M	35.37M	49.95M	32.32M
Total Debt	578.97M	598.53M	615.94M	586.15M	567.88M	521.80M
Total Liabilities	657.25M	681.35M	694.87M	674.12M	649.95M	591.51M
Stockholders Equity	113.35M	127.67M	121.14M	116.15M	105.76M	95.80M
Cash Flow
Free Cash Flow	-28.30M	-16.98M	-33.90M	-41.02M	-45.53M	2.52M
Operating Cash Flow	7.75M	23.12M	11.46M	25.75M	38.58M	36.34M
Investing Cash Flow	-23.71M	-32.24M	-74.83M	-83.24M	-83.27M	-32.47M
Financing Cash Flow	10.00M	10.53M	47.44M	42.91M	62.32M	11.51M

Meritage Hospitality Group Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 4.12
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• 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 4.12 is above the 20-day moving average (MA) of 2.50, above the 50-day MA of 4.01, and below the 200-day MA of 10.01, indicating a bearish trend. The MACD of -0.59 indicates Negative momentum. The RSI at 32.12 is Neutral, neither overbought nor oversold. The STOCH value of 70.93 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
RAVE	77 Outperform	$45.33M	16.45	20.05%	―	0.35%	9.25%
BDL	62 Neutral	$59.01M	11.72	7.97%	1.89%	8.99%	49.97%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
STKS	48 Neutral	$63.45M	-0.66	-51.90%	―	51.57%	-367.14%
NDLS	44 Neutral	$35.11M	-0.87	―	―	-0.35%	-37.02%
FAT	41 Neutral	$7.79M	-0.03	―	760.71%	-5.26%	-44.78%
MHGU	40 Underperform	$13.91M	-1.79	―	―	-3.97%	-500.13%