Soup Restaurant – What really matters in a Stock

15 restaurants | Since 1991 | Famous for ginger chicken & Herbal Soups

Comparison will be done with Tung Lok Restaurants (540)

1)  IDENTIFICATION OF COMPANIES THAT ARE UNDERVALUED.

  • Price to book ratio : 5.635 (463.5% Above fair value) 540 – 1.874
  • Price to earning ratio : 81.826 ( Above industry standard – 86.29) 540 – 78.667

2)  LEARN ABOUT THEIR NUMBERS

  • Debt To Equity : 0.27% | 22.4%
  • Growth Performance : -8.55 | Not given
  • Dividend Yield : 2.77% [ 5 years] | 0% [ Doesn’t pay]
  • Current Ratio : 2.27 |1.44
  • Book Value per share : 0.0337 | 0.0577
  • Cash Flow per share : 0.0078 [Having negative cashflow for past 4 years]| 0.0208  (540) [3/5 years of positive cash flow]
  • Weak management ability (No progressive Dividend Growth | Low net income/gross profit margin growth | Negative cash flow – price of stock is 25 times of its cashflow).Screen Shot 2017-05-26 at 2.03.21 pmScreen Shot 2017-05-26 at 2.03.19 pm

3) TECHNICAL ANALYSIS

Screen Shot 2017-05-26 at 2.12.55 pm.jpg

Weekly chart price action shows that stock is in a bearish trend as market continues to make lower low and lower high. Stock has just entered into key price level, if broken, market has a higher probability of trend lower for a long time. A purchase order will put you in a 1:1 RR ratio.

4) Would I be vested ?

No!

Fundamental:

  • Overvalued without any justification (Probably people bought it cause of the brand)
  • 4 years of debt/equity numbers not filed in
  • Poor growth rate
  • Cashflow is so poor probably due to the reinvestment rate (to reduce financing)
  • No dividend

Technical:

  • Market in bearish trend
  • Weak RR ratio
  • Price got legroom to 0.118

“+1 Knowledge point”

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