The ONE Group Hospitality (STKS) AI Stock Analysis

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The ONE Group Hospitality

(NASDAQ:STKS)

57Neutral

The ONE Group Hospitality has demonstrated strong revenue growth and positive earnings guidance, contributing to a relatively positive outlook. However, significant financial risks due to high leverage, net losses, and bearish technical indicators weigh on the overall score. Valuation concerns also exist due to the negative P/E ratio and lack of dividend yield.

Positive Factors

Consumer Resilience

Higher-end consumers showed resilience, with Benihana performing the strongest within the portfolio.

Growth Potential

The attractiveness of the longer-term potential of the company's growth brands, particularly STK and Benihana, is compelling.

Negative Factors

Growth Visibility

Current valuation reflects a lack of near- to medium-term SSS growth visibility across all brands, complicated by the financing costs of the acquisition of Benihana.

Profitability Challenges

2024 and 2025 EPS estimates significantly lowered, indicating reduced profitability projections.

Revenue and Margin Concerns

Top line visibility remains limited with reduced revenue guidance and lower SSS growth estimates.

The ONE Group Hospitality (STKS) vs. S&P 500 (SPY)

Market Cap

$86.25M

Dividend YieldN/A

Average Volume (3M)81.42K

Price to Earnings (P/E)―

Beta (1Y)1.27

Revenue Growth102.35%

EPS Growth-846.68%

CountryUS

Employees10,800

SectorConsumer Cyclical

Sector Strength58

IndustryRestaurants

Share Statistics

EPS (TTM)-1.12

Shares Outstanding31,026,865

10 Day Avg. Volume102,140

30 Day Avg. Volume81,419

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.13

Price to Cash Flow (P/CF)1.20

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$4.75

Price Target Upside70.86% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering4

The ONE Group Hospitality Business Overview & Revenue Model

Company DescriptionThe ONE Group Hospitality, Inc. (STKS) is a global hospitality company that develops and operates upscale, high-energy restaurants and lounges. The company is best known for its STK brand, which combines a modern steakhouse and a chic lounge into one unique dining experience. With locations across major cities in the United States and internationally, The ONE Group focuses on creating memorable experiences through its innovative cuisine and vibrant atmosphere.

How the Company Makes MoneyThe ONE Group Hospitality primarily generates revenue through its chain of STK restaurants. The company's revenue model includes several streams: dining services, where revenue is earned through food and beverage sales in their upscale restaurants; event hosting, where venues are rented out for private events and parties; and management and licensing fees, which come from managing and licensing the STK brand to third-party operators in various locations. The company also benefits from strategic partnerships and collaborations with hospitality and entertainment brands, enhancing its market reach and brand visibility. Additionally, The ONE Group leverages its loyalty and rewards programs to encourage repeat business and increase customer spending.

The ONE Group Hospitality Financial Statement Overview

Summary

The ONE Group Hospitality shows strong revenue growth but struggles with profitability due to negative net income and high leverage. The stable gross profit margins and positive operating cash flow are encouraging, but high debt and volatile cash flows pose risks. Improvements in net margins and debt reduction are needed for better financial stability.

Income Statement

Positive

The ONE Group Hospitality shows a strong revenue growth trend, increasing from $120.7M in 2019 to $673.3M in 2024. However, the company struggles with profitability, as evidenced by the negative net income in 2024. Gross profit margins have been relatively stable, but net profit margins have fluctuated significantly, indicating challenges in controlling costs or achieving operational efficiencies.

Balance Sheet

Neutral

The company's balance sheet highlights a high debt-to-equity ratio, reflecting high leverage that could pose financial risks. Stockholders' equity has decreased over the years, which, when combined with rising liabilities, suggests financial vulnerability. However, the increase in total assets indicates potential growth opportunities.

Cash Flow

Neutral

The cash flow statement reveals volatility, with negative free cash flow in recent years despite positive operating cash flow. The negative free cash flow is concerning as it indicates challenges in funding operations and investments without relying on external financing. Yet, operating cash flow has generally been positive, suggesting underlying operational strength.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
673.34M	332.77M	316.64M	277.18M	141.94M
	Gross Profit
122.75M	65.79M	66.58M	65.18M	20.88M
	EBIT
10.77M	9.29M	23.39M	19.39M	7.04M
	EBITDA
40.72M	34.02M	31.35M	38.57M	6.79M
	Net Income Common Stockholders
-15.82M	4.72M	13.53M	31.35M	-13.62M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
28.07M	21.05M	55.12M	23.61M	24.39M
	Total Assets
959.35M	317.25M	291.02M	229.84M	215.57M
	Total Debt
312.91M	200.17M	183.63M	132.64M	159.09M
	Net Debt
284.83M	179.12M	128.51M	109.03M	134.71M
	Total Liabilities
756.75M	249.88M	222.43M	169.31M	193.59M
	Stockholders Equity
47.16M	69.18M	69.71M	61.20M	23.18M
Cash Flow		Free Cash Flow
-27.37M	-22.77M	-7.38M	19.50M	-5.36M
	Operating Cash Flow
44.19M	30.78M	25.25M	30.97M	431.00K
	Investing Cash Flow
-441.39M	-53.55M	-32.63M	-11.47M	-5.79M
	Financing Cash Flow
404.34M	-11.25M	39.10M	-20.27M	17.42M

The ONE Group Hospitality Technical Analysis

Technical Analysis Sentiment

Negative

Last Price2.78

Price Trends

50DMA

2.96

Negative

100DMA

3.11

Negative

200DMA

3.46

Negative

Market Momentum

MACD

-0.05

Positive

RSI

47.05

Neutral

STOCH

31.55

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For STKS, the sentiment is Negative. The current price of 2.78 is below the 20-day moving average (MA) of 2.88, below the 50-day MA of 2.96, and below the 200-day MA of 3.46, indicating a bearish trend. The MACD of -0.05 indicates Positive momentum. The RSI at 47.05 is Neutral, neither overbought nor oversold. The STOCH value of 31.55 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for STKS.

The ONE Group Hospitality Risk Analysis

The ONE Group Hospitality disclosed 29 risk factors in its most recent earnings report. The ONE Group Hospitality 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

The ONE Group Hospitality Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CAKE	71 Outperform	$2.28B	14.39	41.18%	2.26%	4.13%	56.76%
EAT	68 Neutral	$6.81B	26.65	2390.91%	―	13.67%	69.41%
BJRI	67 Neutral	$725.62M	46.85	4.54%	―	1.81%	-15.53%
Sector *	60 Neutral	$7.23B	11.55	3.67%	4.04%	2.96%	-13.54%
STKS	57 Neutral	$86.25M	―	-11.53%	―	102.35%	-846.68%
DIN	56 Neutral	$316.32M	4.80	-42.81%	10.08%	-2.26%	-32.36%
RRGB	41 Neutral	$47.51M	―	92.02%	―	-4.19%	-266.52%

* Consumer Cyclical Sector Average

Performance Comparison

STKS

The ONE Group Hospitality

2.78

-2.44

-46.74%

BJRI

BJ's Restaurants

32.40

0.63

1.98%

EAT

Brinker International

153.45

107.24

232.07%

DIN

Dine Brands Global

20.23

-21.08

-51.03%

RRGB

Red Robin Gourmet

2.72

-3.92

-59.04%

CAKE

Cheesecake Factory

47.87

14.42

43.11%

The ONE Group Hospitality Earnings Call Summary

Earnings Call Date: Mar 10, 2025 | % Change Since: -3.14% | Next Earnings Date: May 13, 2025

Earnings Call Sentiment Positive

The earnings call reflects a transformative year marked by strategic acquisitions and record revenue growth. While there are challenges such as a decline in comparable sales and increased operating expenses, the company's successful integration of acquisitions, strong financial position, and innovative culinary and marketing strategies contribute positively to the overall outlook.

Highlights

Transformative Acquisition

The strategic acquisition of Benihana and RA Sushi expanded the portfolio of vibe dining venues, achieving scale and operational efficiencies with $20 million in targeted cost savings by 2026.

Record Revenue Growth

Full year revenue increased over 100% to $672 million, and adjusted EBITDA rose almost 130% to $75.2 million, both at the higher end of 2024 guidance ranges.

Strong Fourth Quarter Performance

Fourth quarter revenues increased by almost 150% to a record $222 million, with adjusted EBITDA also up by nearly 150% to $30.3 million.

Successful Restaurant Openings

Opened three restaurants, including two company-owned units and one managed location, ending the year with six new restaurants.

Solid Financial Position

Over $71 million in liquid resources at year end, with no drawn revolving credit facility.

Culinary and Marketing Innovations

A successful Wagyu program at Benihana and new drink menu launched. Enhanced digital engagement and local store outreach to drive traffic.

Lowlights

Comparable Sales Decline

Consolidated comparable sales saw a reduction, with a 4.3% decline noted in the fourth quarter.

Increased Operating Expenses

Company-owned restaurant operating expenses as a percentage of net revenue increased by 340 basis points due to cost inflation.

Net Loss for the Quarter

Net loss available to common stockholders was $5.4 million or $0.18 per share, compared to a net income of $4.6 million in the prior year.

Interest Expense Increase

Interest expense rose to $10.5 million from $1.9 million in the prior year quarter due to higher outstanding debt post-acquisition.

Company Guidance

During the fourth quarter and full year 2024 earnings call, The ONE Group reported significant growth metrics and provided forward-looking guidance. The company achieved a full-year revenue increase of over 100% to $672 million and an adjusted EBITDA increase of almost 130% to $75.2 million. For the fourth quarter alone, revenue surged by nearly 150% to a record $222 million, with adjusted EBITDA rising about 150% to $30.3 million. The company aims for $20 million in total cost savings by the end of 2026, leveraging efficiencies from its acquisition of Benihana and RA Sushi. Looking ahead, The ONE Group projects 2025 revenues between $835 million and $870 million, with adjusted EBITDA ranging from $95 million to $115 million and plans to open five to seven new venues. For the first quarter of 2025, they expect revenues between $205 million and $210 million, adjusted EBITDA of $24 million to $26 million, and consolidated comparable sales improvement sequentially. The call also highlighted ongoing initiatives to drive sales through strategic pillars of operations, culinary innovation, and marketing, while maintaining a focus on cost efficiency and guest experience.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.