Del Frisco’s Restaurant Group Inc (DFRG): A Solid Small-Cap Stock

Valuation

Del Frisco’s trades at nearly 21 times forward earnings, the highest in the company’s history. Of course, it should be noted that Del Frisco’s has only been public for close to a year so it is difficult to judge current valuations relative to historic norms. That being said, we can compare Del Frisco’s valuation to other similar companies such as Ruth’s Hospitality, Bravo Brio Restaurant Group, Inc. (NASDAQ:BBRG), and Darden.

Del Frisco’s is the most expensive of the group. However, it should be noted that Del Frisco’s is smaller than the aforementioned companies. Also, Del Frisco’s does not have any debt. That being said, it is difficult to argue that Del Frisco’s is cheap.

Conclusion

In my opinion, Del Frisco’s has a bright future. In particular, the company’s Del Frisco’s Double Eagle Steakhouse and Del Frisco’s Grille are poised to grow rapidly. In my opinion, one major advantage that Del Frisco’s has is its cross brand recognition. Over time, I would expect the company to continue to shift towards the Del Frisco’s Grille concept as the target market is larger. The brand association between Del Frisco’s Double Eagle Steakhouse and Del Frisco’s Grille should be an advantage for the company. Judging by current valuations, other investors seem to agree with me that the future is bright for Del Frisco’s. While I don’t think it is a bad investment at current levels, I believe that investors would be better served waiting for a pullback before buying.

Sammy Pollack has no position in any stocks mentioned. The Motley Fool owns shares of Darden Restaurants (NYSE:DRI).

The article Del Frisco’s Restaurant Group: A Solid Small-Cap Stock originally appeared on Fool.com and is written by Sammy Pollack.

Sammy is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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