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Why Experts Love These 3 Restaurant Stocks: DRI, PLAY, DIN

By U.S. News & World Report

What do Darden Restaurants (ticker: DRI), Dave & Buster’s Entertainment ( PLAY) and DineEquity ( DIN) have in common? They’re three restaurant stocks that market experts really love.

U.S. News recently screened for stocks with institutional ownership that both increased in the latest quarter and is higher than the category average. With help from TipRanks, we also screened for stocks with positive sentiment among bloggers and analysts who have solid investing track records, and applied the results on scale of zero to 100 to create a ranking of Expert Pick stocks.

[See: 7 Dividend Stocks to Buy That Pay More Each Year.]

In the June screen, only 16 stocks — in a universe of over 3,000 — managed to obtain a perfect score of 100. And three of them are restaurant stocks, an industry that’s generally struggled over the last few years. So what’s so special about DRI, PLAY and DIN?

Darden Restaurants. DRI stock gives investors exposure to an interesting portfolio of dining brands: Olive Garden and LongHorn Steakhouse are the two tentpoles, but a handful of other chains like The Capital Grille and Yard House are also under the umbrella.

Darden Restaurants isn’t what you’d traditionally consider a growth stock. But the expectations for the industry are so low, all the company has to do is grow slowly for DRI stock to rally.

For instance: When Darden reported quarterly earnings in late March, revenue grew by just 1.7 percent year-over-year, with same-store sales up 0.9 percent. DRI stock shot 9.3 percent higher that day.

But more so than the past, investors are excited about Darden’s brighter-than-expected future: in March, the company increased its guidance for same-store sales growth and earnings per share, and also announced the acquisition of Cheddar’s Scratch Kitchen, a differentiated restaurant chain with a strong brand and lots of room to grow.

Dave & Buster’s. Dave & Buster’s offers a unique experience in its restaurants, and its stock, PLAY, has offered special returns for investors as well. Shares are up 69 percent in the last year, as the part-restaurant-part-arcade chain has posted surprisingly impressive sales growth in quarter after quarter.

Considering how the growing aversion to dining out in America has hit the industry, the fact that Dave & Buster’s is expected to grow revenue by 16.6 percent this fiscal year and over 11 percent next year is quite an accomplishment.

[See: Artificial Intelligence Stocks: 10 Companies Betting on AI.]

At its core, D&B’s is the story of a society increasingly engulfed in technology and the internet. Restaurants, with their screen-heavy atmosphere replete with high-tech arcade games everywhere, are differentiated from the competition. As brick-and-mortar retailers suffer lower foot traffic due to e-commerce, restaurants lose traffic too. To lure customers out of the house and defend against the convenience of delivery, restaurants need to offer an entirely original experience.

“Dave & Buster’s serves uniquely as an ‘adult’ arcade, a sort of Chuck E. Cheese’s for grownups,” says K C Ma, professor of finance at Stetson University. “The bulk of D&B’s profit comes from its high-margin games and amusements.”

Looking at PLAY stock’s financial statements, the company’s distinction becomes obvious. Not only did the majority — 55 percent — of revenue come from its amusement segment last year, but that segment’s margins were much higher than food and beverage segment margins. Gross margin for its amusement revenue was 88.2 percent, compared to just 74.6 percent for food and beverage.

A money-printing machine goes a long way in differentiating restaurants, and that’s translating to high growth. That competitive advantage and impressive execution is what experts seem to love about PLAY stock, and what the market seems to love about it as well.

DineEquity. Last but not least, DineEquity, which owns both Applebee’s and IHOP, also currently earns high praise from Wall Street analysts, bloggers, and institutions.

But unlike DRI and PLAY stock, DIN has been anything but popular with investors over the last year; shares are down 46 percent over that time.

The main reason why DineEquity stock has been on the decline is straightforward: since early 2015, same-restaurant sales growth at IHOP and Applebee’s have been consistently falling. In the first quarter, comps fell 1.7 percent and 7.9 percent at IHOP and Applebee’s, respectively.

So, why is this stock so popular with experts? There are a few simple reasons DIN is a popular contrarian pick: its valuation, its dividend and its profitability. Trading at less than 10 times earnings, DIN stock trades for less than half its five-year average price-to-earnings ratio of 20.3, and about 40 percent of the Standard & Poor’s 500 index multiple of 24.1.

At the same time, at 8.5 percent, its massive dividend speaks for itself. DineEquity still has the profits to finance that dividend and with EPS expected to grow by 11 percent in 2018, that will likely be the case for the foreseeable future.

[Read: Are Retail Stocks and Mall REITs a Value Play?]

While DineEquity isn’t thriving like Dave & Buster’s, analysts feel the stock is dramatically undervalued, and have a consensus price target of $62.50, implying roughly 35 percent upside.

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Why Experts Love These 3 Restaurant Stocks: DRI, PLAY, DIN originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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