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Meritage Hospitality Group Inc. (MHGU)
:MHGU
US Market

Meritage Hospitality Group (MHGU) AI Stock Analysis

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Meritage Hospitality Group

(OTC:MHGU)

Rating:54Neutral
Price Target:
$13.00
▲(2.52%Upside)
Meritage Hospitality Group faces significant financial challenges with high leverage and negative free cash flow, impacting its financial stability. Technical analysis shows mixed signals with potential bearish momentum. The high P/E ratio suggests overvaluation, limiting the stock's attractiveness. Improvements in cost management and debt reduction could enhance future performance.

Meritage Hospitality Group (MHGU) vs. SPDR S&P 500 ETF (SPY)

Meritage Hospitality Group Business Overview & Revenue Model

Company DescriptionMeritage 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 MoneyMeritage 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 shows stable revenue with strong gross margins, but faces challenges in profitability and high financial leverage. The consistent negative free cash flow highlights the need for careful financial management to navigate its high debt levels and fund future growth.
Income Statement
65
Positive
The revenue growth has been modest, with a slight decline in the latest year. Gross profit margin remains strong, indicating effective cost management. However, net profit margin is relatively low, suggesting pressure on profitability. The drop in EBIT and EBITDA margins over the years reflects operational challenges.
Balance Sheet
60
Neutral
The debt-to-equity ratio is high, indicating significant leverage, which could pose a risk if earnings do not improve. Return on equity is moderate, reflecting average returns for shareholders. The equity ratio is relatively low, signaling a heavy reliance on debt financing.
Cash Flow
55
Neutral
Operating cash flow is positive, but free cash flow is consistently negative due to high capital expenditures. The cash flow to net income ratios suggest some operational cash generation capability, but the lack of free cash flow indicates limited flexibility to fund growth without external financing.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue668.80M672.49M626.04M577.13M516.18M
Gross Profit277.53M80.89M252.19M242.96M228.65M
EBITDA37.55M41.67M35.25M47.35M44.84M
Net Income7.80M6.14M8.48M17.45M14.91M
Balance Sheet
Total Assets810.16M816.90M791.32M758.63M689.93M
Cash, Cash Equivalents and Short-Term Investments20.85M19.43M35.37M49.95M32.32M
Total Debt598.53M615.94M586.15M567.88M521.80M
Total Liabilities681.35M694.87M674.12M649.95M591.51M
Stockholders Equity127.67M121.14M116.15M105.76M95.80M
Cash Flow
Free Cash Flow-16.98M-33.90M-41.02M-45.53M2.52M
Operating Cash Flow23.12M11.46M25.75M38.58M36.34M
Investing Cash Flow-32.24M-74.83M-83.24M-83.27M-32.47M
Financing Cash Flow10.53M47.44M42.91M62.32M11.51M

Meritage Hospitality Group Technical Analysis

Technical Analysis Sentiment
Negative
Last Price12.68
Price Trends
50DMA
12.90
Negative
100DMA
13.39
Negative
200DMA
14.21
Negative
Market Momentum
MACD
-0.08
Positive
RSI
45.54
Neutral
STOCH
34.38
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 12.68 is below the 20-day moving average (MA) of 12.91, below the 50-day MA of 12.90, and below the 200-day MA of 14.21, indicating a bearish trend. The MACD of -0.08 indicates Positive momentum. The RSI at 45.54 is Neutral, neither overbought nor oversold. The STOCH value of 34.38 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

Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
BDBDL
75
Outperform
$59.18M14.616.48%1.63%9.38%14.76%
63
Neutral
$16.70B11.33-6.96%2.94%1.73%-24.85%
56
Neutral
$143.70M-9.31%138.50%-60576.19%
55
Neutral
$111.56M92.02%-1.68%-140.83%
54
Neutral
$79.74M58.301.83%-2.53%-66.89%
50
Neutral
$98.82M
-14.11%54.77%
FAFAT
45
Neutral
$44.78M38.50%416.00%10.63%-93.67%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
MHGU
Meritage Hospitality Group
12.68
-4.42
-25.85%
BDL
Flanigan's Enterprises
33.12
6.89
26.27%
RRGB
Red Robin Gourmet
6.01
-0.15
-2.44%
STKS
The ONE Group Hospitality
4.72
0.23
5.12%
FAT
Fat Brands
2.49
-0.31
-11.07%
THCH
TH International
2.99
-0.57
-16.01%
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 03, 2025