Free Annual Reports
Nathan's Famous Has Tasty Earnings
A piece of Americana, the iconic brand Nathan's Famous, Inc. (Nasdaq:NATH), which grew from its humble origins as a single hot dog stand on Coney Island to a nationwide network of stores, is an intriguing small cap story. In the world of vastly larger restaurant companies and fast-food chains, Nathan's is one of the unique niche players that has found a place as both a cultural landmark and a financially-thriving business.
IN PICTURES: 8 Tips For Starting Your Own Business
Nathan's Earns
If you thought that Nathan's, with its famous frankfurters, was only a glorified hot dog stand and a quaint bit of the past leftover from earlier Coney Island days, you'd be wrong. In its year-end earnings report, it boosted its net income 14% from last year with earnings per share at $1.21, up from $1.01 in its fiscal year ended March, 2008. Revenue was up to $49.2 million from $47.2 million the previous year. For the quarter ending in March, earnings were 15 cents a share versus 12 cents a share for last year's same quarter.
Small but Potent
You'll notice the absolute numbers for revenue and earnings are actually modest, in the low millions, and the market cap of Nathan's is only $75 million. To put this into perspective, McDonald's Corp. (NYSE:MCD) has a $63 billion market cap, with the resultant earnings, scale and omnipresent power that goes with all that. It's worth noting, though, that Nathan's, with its 200-plus locations, has adopted some of the business techniques of McDonald's, with its Frankfurter University training for prospective franchisees. This process is obviously working well for Nathan's, which has shown steady growth over the last few years. Nathan's also exploits a brand advantage that McDonald's and other larger fast-food places either cannot or do not, as it also sells its hot dogs extensively through supermarkets and even other restaurants. (For more, check out Hamburger Economics: The Big Mac Index.)
While McDonald's supposedly competes against anyone or anything that makes or sells food, realistically McDonald's is in battle more with larger companies such as Yum! Brands (NYSE:YUM), with its thriving Pizza Hut, KFC and Taco Bell franchises. While logic might suggest that the big players would crush a small hot dog place like Nathan's, or leave no customers for it to feed, logic has little to do with our culture's eating habits. Nathan's has landed a significant, consistent following because, as McDonald's is identified with the hamburger, Nathan's is identified with the hot dog.
Small is no Guarantee of Success, Either
Just as large-scale companies can flop, even if they are American icons (a moment of silence here for the former General Motors), so too is small scale no guarantee of success - automatic, easy or otherwise. Steak N Shake Co. Inc. (NYSE:SNS), a similar-sized themed restaurant chain with a $260 million market cap, has struggled a bit through the recession with some up and down quarters, despite having an updated retro-traditional diner feel, a popular value-priced menu and strong regional Midwest origins on which it has built over time. In this recession, nothing has been easy, even Americana eats. One fascinating development, though, has been the resurgence of the hot dog, at least as a recession staple. (Check out Small Cap Research Can Have Big Impact for more on small cap stocks.)
Synergies and Lore
On the business side, you have the Nathan's tightly-focused approach in frankfurter-based business franchising, also with its wide sales and distribution channels through supermarkets, where they compete with Kraft Foods (NYSE:KFT) and its Oscar-Mayer brand and Sara Lee Corp. (NYSE:SLE) with its Ball Park brand. Nathan's thrives on the strength of its own strong brand identification. This should bring continuing steady growth to what is a focused, well-managed company. Nathan's also currently carries no long-term debt.
The Bottom Line
On the parts that are harder to quantify - the parts that resonate in feeling - you have the famous Coney Island hot-dog eating contests, the allure of summertime itself, the legendary hot dog stand where presidents, movie stars and ordinary folks like us have eaten. Nathan's is really an American success story, wrought from the dreams of Polish immigrant Nathan Handwerker and his wife, Ida, in 1916, when they conquered New York via the humble hot dog. (To learn more, read Sinking Your teeth Into Restaurant Stocks.)
IN PICTURES: 8 Tips For Starting Your Own Business
Nathan's Earns
If you thought that Nathan's, with its famous frankfurters, was only a glorified hot dog stand and a quaint bit of the past leftover from earlier Coney Island days, you'd be wrong. In its year-end earnings report, it boosted its net income 14% from last year with earnings per share at $1.21, up from $1.01 in its fiscal year ended March, 2008. Revenue was up to $49.2 million from $47.2 million the previous year. For the quarter ending in March, earnings were 15 cents a share versus 12 cents a share for last year's same quarter.
Small but Potent
You'll notice the absolute numbers for revenue and earnings are actually modest, in the low millions, and the market cap of Nathan's is only $75 million. To put this into perspective, McDonald's Corp. (NYSE:MCD) has a $63 billion market cap, with the resultant earnings, scale and omnipresent power that goes with all that. It's worth noting, though, that Nathan's, with its 200-plus locations, has adopted some of the business techniques of McDonald's, with its Frankfurter University training for prospective franchisees. This process is obviously working well for Nathan's, which has shown steady growth over the last few years. Nathan's also exploits a brand advantage that McDonald's and other larger fast-food places either cannot or do not, as it also sells its hot dogs extensively through supermarkets and even other restaurants. (For more, check out Hamburger Economics: The Big Mac Index.)
Small is no Guarantee of Success, Either
Just as large-scale companies can flop, even if they are American icons (a moment of silence here for the former General Motors), so too is small scale no guarantee of success - automatic, easy or otherwise. Steak N Shake Co. Inc. (NYSE:SNS), a similar-sized themed restaurant chain with a $260 million market cap, has struggled a bit through the recession with some up and down quarters, despite having an updated retro-traditional diner feel, a popular value-priced menu and strong regional Midwest origins on which it has built over time. In this recession, nothing has been easy, even Americana eats. One fascinating development, though, has been the resurgence of the hot dog, at least as a recession staple. (Check out Small Cap Research Can Have Big Impact for more on small cap stocks.)
Synergies and Lore
On the business side, you have the Nathan's tightly-focused approach in frankfurter-based business franchising, also with its wide sales and distribution channels through supermarkets, where they compete with Kraft Foods (NYSE:KFT) and its Oscar-Mayer brand and Sara Lee Corp. (NYSE:SLE) with its Ball Park brand. Nathan's thrives on the strength of its own strong brand identification. This should bring continuing steady growth to what is a focused, well-managed company. Nathan's also currently carries no long-term debt.
The Bottom Line
On the parts that are harder to quantify - the parts that resonate in feeling - you have the famous Coney Island hot-dog eating contests, the allure of summertime itself, the legendary hot dog stand where presidents, movie stars and ordinary folks like us have eaten. Nathan's is really an American success story, wrought from the dreams of Polish immigrant Nathan Handwerker and his wife, Ida, in 1916, when they conquered New York via the humble hot dog. (To learn more, read Sinking Your teeth Into Restaurant Stocks.)
by
Greg Sushinsky
Greg Sushinsky is a passionate independent investor, who has done his own research, analysis and investing for 20 years. One of his earliest investing memories was when he first saved and bought U.S. Savings Bonds with his own money as a small child. From there, he studied investing on his own and made small stock purchases as he grew as an investor.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Sushinsky still follows the markets, studies and reads widely in financial literature, and has written over 75 articles on investing. He is also a professional editor, whose work is published extensively in large-circulation magazines, digests and across the internet. In other pursuits, Sushinsky writes fiction and has a university degree in philosophy. To see more of Sushinsky's literary work, see http://writing.gregsushinsky.com/.
Free Annual Reports
