have u considered that SG is "losing money" because they are reinvesting in the company and future growth? That's quite the norm for growth companies.....
Yes that is a consideration but the issue with that thought is that growth companies are not capital intensive like SG. When you think of high-growth companies it's usually tech companies that command a higher premium since their COGs are essentially zero and most expenses come from marketing and G&A.
For SG, they try to convince the market that they've got some tech angle to warrant a higher multiple but in reality they don't and should not be treated like that, on top of everything else I called out.
Additionally, when you look at other restaurant companies that have better margins, and better restauarant-level margins, they're trading at fractions of what SG is trading at. CMG being the best close competitor has better everything aside from rev growth just considering its size and was trading at half the mutliple.
Also, other restaurant companies that went public did so when they were profitbale and have continued to be profitbale contrary to SG. Also, a lot of SGs adjustments come from SBC (~32%) https://cedargrovecapital.substack.com/p/sbc-a-chart-you-dont-want-to-miss?s=w so over time you're just getting diluted more and more
SG's restaurant level operating margins are 12%. I don't see them listed in your article, but I believe these margins are quite competitive as Chipotle's are in the mid teens as well
have u considered that SG is "losing money" because they are reinvesting in the company and future growth? That's quite the norm for growth companies.....
Yes that is a consideration but the issue with that thought is that growth companies are not capital intensive like SG. When you think of high-growth companies it's usually tech companies that command a higher premium since their COGs are essentially zero and most expenses come from marketing and G&A.
For SG, they try to convince the market that they've got some tech angle to warrant a higher multiple but in reality they don't and should not be treated like that, on top of everything else I called out.
Additionally, when you look at other restaurant companies that have better margins, and better restauarant-level margins, they're trading at fractions of what SG is trading at. CMG being the best close competitor has better everything aside from rev growth just considering its size and was trading at half the mutliple.
https://twitter.com/paulcerro/status/1492198308756037633?s=20&t=1WFGz8ZZBiE3h_00vgw-UA
Also, other restaurant companies that went public did so when they were profitbale and have continued to be profitbale contrary to SG. Also, a lot of SGs adjustments come from SBC (~32%) https://cedargrovecapital.substack.com/p/sbc-a-chart-you-dont-want-to-miss?s=w so over time you're just getting diluted more and more
SG's restaurant level operating margins are 12%. I don't see them listed in your article, but I believe these margins are quite competitive as Chipotle's are in the mid teens as well
I would tend to agree with you on that point but it's not entirely "accurate". They strip out certain things.
Chit Chat money actually explains this in their podcast from a few days ago. Worth a listen.
https://open.spotify.com/episode/1ZUJyHsOwizj1iW9kSfLce?si=VVbEhv-GQ1i_5497WcoIdQ&utm_source=copy-link