Sonic (SONC:NAS) Fundamental Valuation Report

Fundamental Valuation Report

Sonic(SONC:NAS)

Consumer Cyclical:Restaurants

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$43.26 (USD) 26/10/2018

Weighted Valuation
$40.07 (USD)

Overall Rating
Overvalued by 7.4%

Valuation Models Analyst Consensus: $43.50 (USD)
(in order of importance) Multiples: $34.92 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (SONC:NAS USD)

Price 43.26
Range 43.19 – 43.36
52 week 23.85 – 43.47
Open 43.31
Vol / Avg. 844564/984428
Mkt cap 1.54B
P/E 23.13
Div/yield 0.64/0.01
EPS 1.87
Shares 35.69M
Beta 1.48

Company Description

Sonic Corp operates and franchises drive-in restaurants throughout the United States. The restaurants typically consist of a building that houses only a kitchen to go along with 16 to 24 parking spaces that have their own payment terminals, intercom speakers, and menu boards. Carhops serve customers in their cars. Many locations also have a drive-thru lane and patio seating as alternatives. Sonic franchises roughly 90% of its restaurants, and the royalty revenue the company earns on franchise sales contribute roughly a quarter of total company revenue. Company-operated stores provide the balance of total revenue. Sonic owns the property on which hundreds of its restaurants are located. For those properties that house franchised stores, franchisees lease from the company.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for SONC:NAS

Using a discounted cash flow model we generated an intrinsic value of $33.85 (USD) for SONC:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

SONC:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $33.85 1% 5% 1% 5%
WACC (or Ke) 9.09 $43.97 $26.59
Terminal Growth Rate 3.00 $27.24 $43.06
Tax Rate 0.04 $36.88 $30.89
Cash Flow 176,886,968 $30.29 $37.41
Capital Expenditures -50,186,400 $32.98 $34.72
Long Term Debt 600,002,000 $34.69 $33.01

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $27.13 (USD) for SONC:NAS. We also generated a valuation of $39.73 (USD) using other metrics and comparables.
The comparable companies were Cheesecake Factory (CAKE:NAS), Dunkin Brands Group (DNKN:NAS), Jack In The Box (JACK:NAS), Papa John’s International (PZZA:NAS) and Wendy’s (WEN:NAS).

Company SONC:NAS End Date Value
Earnings/Share $1.87 (USD)
Book Value/Share ($7.68) (USD)
Sales/Share $11.03 (USD)
Cash Flow/Share $2.27 (USD)
EBITDA/Share $3.82 (USD)
Price Based on Comps Adjustment Factor (%)
$36.54 (USD) -36.0
$0.00 (USD) 0.0
$31.64 (USD) -33.4
$21.56 (USD) -16.9
$51.91 (USD) -7.7
SONC:NAS Ratios Used Average Values CAKE:NAS DNKN:NAS JACK:NAS PZZA:NAS WEN:NAS
23.43 PE Ratio 19.54 18.21 18.16 19.50 22.59 19.26
0.00 PB Ratio 6.72 4.00 0.00 0.00 0.00 9.43
3.93 PS Ratio 2.87 1.09 7.42 1.79 1.01 3.03
19.09 PCF Ratio 17.83 9.48 23.58 28.21 13.40 14.50
14.67 EV to EBITDA 13.60 10.59 17.86 9.04 12.83 17.69

Multiples

Using a multiples approach we generated a valuation of  $34.92 (USD) for SONC:NAS

Company SONC:NAS End Date Value
Earnings/Share $1.87 (USD)
Book Value/Share ($7.68) (USD)
Sales/Share $11.03 (USD)
Cash Flow/Share $2.27 (USD)
EBITDA/Share $3.82 (USD)
Price Based on Comps Adjustment Factor
$40.51 (USD) 0
$0.00 (USD) 0
$27.05 (USD) 0
$28.81 (USD) 0
$43.28 (USD) 0
Ratios Ratio Average
PE Ratio 21.66
PB Ratio 49.19
PS Ratio 2.45
PCF Ratio 12.69
EV to EBITDA 11.34

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  SONC:NAS for the last 7 years was  45.67

We ran the Adjusted Book Value for  SONC:NAS and generated a book value of  ($8.12) (USD)
By multiplying these we get an adjusted valuation of  ($370.83) (USD)

Analyst Data

In the Stockcalc database there are 1 analysts that provide a valuation for SONC:NAS. The 1 analysts have a concensus valuation for SONC:NAS for 2019 of $43.50 (USD).

SONC:NAS Sonic

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
0 3 0 3.0000 Hold 2018-10-25

Current Price: 43.26 USD

Analyst Consensus
USD Millions 2019 2020
Mean EPS 1.68 1.89
# EPS Analysts 2 1
Mean Revenue 405.80 416.40
# Revenue Analysts 2 1
Mean Target Price 43.50
Mean Cash Flow 2.93 3.30
Mean EBITDA 150.30 155.70
Mean Net Income 56.20 58.40
Mean Debt Outstanding
Mean Tax Rate 24.50
Mean Growth Rate 15.00
Mean Capital Expenditure 28.00 26.00

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

Notice to User


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