What a brutal six months it’s been for Bloomin' Brands. The stock has dropped 24.1% and now trades at $5.71, rattling many shareholders. This might have investors contemplating their next move.
Is now the time to buy Bloomin' Brands, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Bloomin' Brands Will Underperform?
Despite the more favorable entry price, we're swiping left on Bloomin' Brands for now. Here are three reasons why BLMN doesn't excite us and a stock we'd rather own.
1. Flat Same-Store Sales Indicate Weak Demand
Same-store sales show the change in sales at restaurants open for at least a year. This is a key performance indicator because it measures organic growth.
Bloomin' Brands’s demand within its existing dining locations has barely increased over the last two years as its same-store sales were flat.
2. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Bloomin' Brands’s revenue to stall, close to This projection doesn't excite us and indicates its newer menu offerings will not accelerate its top-line performance yet.
3. Low Gross Margin Reveals Weak Structural Profitability
We prefer higher gross margins because they not only make it easier to generate more operating profits but also indicate pricing power and differentiation, whether it be the dining experience or quality and taste of food.
Bloomin' Brands has bad unit economics for a restaurant company, signaling it operates in a competitive market and has little room for error if demand unexpectedly falls. As you can see below, it averaged a 15.7% gross margin over the last two years. Said differently, Bloomin' Brands had to pay a chunky $84.31 to its suppliers for every $100 in revenue. 
Final Judgment
We see the value of companies helping consumers, but in the case of Bloomin' Brands, we’re out. Following the recent decline, the stock trades at 6.4× forward P/E (or $5.71 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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