Boston Chicken
Boston Chicken ( BC) has a 6.36% ROE , which is very low compared to the rest of the restaurant industry and versus company’s WACC as cost of debt alone ( mostly 130million in convertible subordinated notes) is around 4%. As another point of reference, YUM Brands Inc has ROE of 50% !!!(
BC has ROA of 3.39% , which is lower than restaurant industry average (
(, and significantly lower than YUM brands( one of the competitors) that has ROA of 12.25%.
BC has a 6.66% return-on-invested capital ratio, which is also much lower than the rest of the industry .
Its competitor YUM brands Inc. has this ratio at 16.17%.
All the above indicated that Boston Chicken is not able to reinvest its earnings as efficiently as the rest of the industry. Management could be more effective in this area.
At the same time the above margins are consistent with firm’s stated competitive strategy. Its product is not differentiated at all, as it basically selling chicken in a highly competitive space, therefore very low profit margins are to be expected.
BC’s gross profit margin is at 25% , which is in line with the rest of the industry. Its NOPAT margin is 16.08% and EBITDA margin is 30.82%, which is much better than the rest of the industry.
This means that it has less cash to spend on its business operations compared to its peers and the firm is much better than its peers in controlling its costs and expenses. Boston Chicken is successfully utilizing technology, analyzing data, organizing franchise operations, supply chain etc.
Boston Chicken has current ratio at 2.16, Quick ratio at 1.76, Liabilities-to-equity ratio of 0.88 , and debt-to-equity