Meritage Hospitality Group (MHGU) AI Stock Analysis

• Market Cap: $67.00M
• Dividend Yield: N/A
• Average Volume (3M): 505.00
• Price to Earnings (P/E): 49.0
• Beta (1Y): >-0.01
• Revenue Growth: -3.23%
• EPS Growth: -114.12%
• Country: US
• Employees: 330
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Restaurants
• EPS (TTM): N/A
• Shares Outstanding: 6,291,000
• 10 Day Avg. Volume: 466
• 30 Day Avg. Volume: 505
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 9.90
• Enterprise Value/Revenue: 0.99
• Enterprise Value/Gross Profit: 5.26
• Enterprise Value/Ebitda: 17.66
• 1Y Price Target: $10.50
• Price Target Upside: -1.41% Downside
• Rating Consensus: Moderate Sell
• Number of Analyst Covering: 0

• Rating: 40 Underperform
• Price Target: $10.50 ▼(-1.41% Downside)

Meritage Hospitality Group's stock faces significant financial and technical challenges. The company's declining revenue, high leverage, and constrained cash flow generation are major concerns. Additionally, bearish technical indicators and an overvalued P/E ratio further weigh on the stock's attractiveness. Strategic improvements are necessary to enhance financial stability and investor confidence.

Meritage Hospitality Group Business Overview & Revenue Model

Company Description

Meritage Hospitality Group (MHGU) is a leading restaurant and hospitality management company based in the United States. The company operates a diverse portfolio of quick-service and casual dining restaurants, primarily focusing on well-known brands such as Wendy's and other franchise operations. In addition to restaurant management, MHGU also engages in food service and catering, emphasizing quality and customer experience across its establishments.

How the Company Makes Money

Meritage Hospitality Group generates revenue primarily through the operation of its restaurant locations, earning money from food and beverage sales to consumers. The company benefits from a franchise model, receiving royalties and fees from franchise operations, which contribute significantly to its revenue. Furthermore, MHGU's revenue is bolstered by partnerships with suppliers and vendors, allowing for cost efficiencies and promotional opportunities. The company's growth strategy includes expanding its footprint through new restaurant openings and acquiring existing locations, which further enhances its revenue potential.

Meritage Hospitality Group Financial Statement Overview

Summary

Meritage Hospitality Group demonstrates strengths in gross profit margins and operational cash generation. However, high leverage, low net profit margins, and negative free cash flow present significant challenges, impacting financial stability and growth potential.

Income Statement

Meritage Hospitality Group shows a mixed performance in its income statement. The gross profit margin for 2024 is approximately 41.5%, which is strong for the restaurant industry, indicating effective cost management. However, the net profit margin is relatively low at about 1.2%, reflecting challenges in converting revenue into profit. Revenue growth has been inconsistent, with a slight decline from 2023 to 2024. The EBIT and EBITDA margins are also modest, suggesting room for operational improvements.

Balance Sheet

The balance sheet reveals a high debt-to-equity ratio of 4.69 in 2024, indicating significant leverage and potential financial risk. The return on equity is modest at 6.11%, suggesting moderate efficiency in generating profits from equity. The equity ratio stands at 15.76%, reflecting a relatively low proportion of equity financing, which may limit financial flexibility.

Cash Flow

Cash flow analysis shows challenges, with a negative free cash flow in 2024, although there is improvement from the previous year. The operating cash flow to net income ratio is 2.96, indicating strong cash generation relative to net income. However, the free cash flow to net income ratio is negative, highlighting issues in covering capital expenditures with operating cash flow.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	668.80M	672.49M	626.04M	577.13M	516.18M
Gross Profit	277.53M	80.89M	252.19M	242.96M	228.65M
EBITDA	37.55M	41.67M	35.25M	47.35M	44.84M
Net Income	7.80M	6.14M	8.48M	17.45M	14.91M
Balance Sheet
Total Assets	810.16M	816.90M	791.32M	758.63M	689.93M
Cash, Cash Equivalents and Short-Term Investments	20.85M	19.43M	35.37M	49.95M	32.32M
Total Debt	598.53M	615.94M	586.15M	567.88M	521.80M
Total Liabilities	681.35M	694.87M	674.12M	649.95M	591.51M
Stockholders Equity	127.67M	121.14M	116.15M	105.76M	95.80M
Cash Flow
Free Cash Flow	-16.98M	-33.90M	-41.02M	-45.53M	2.52M
Operating Cash Flow	23.12M	11.46M	25.75M	38.58M	36.34M
Investing Cash Flow	-32.24M	-74.83M	-83.24M	-83.27M	-32.47M
Financing Cash Flow	10.53M	47.44M	42.91M	62.32M	11.51M

Meritage Hospitality Group Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 10.65
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MHGU, the sentiment is Negative. The current price of 10.65 is below the 20-day moving average (MA) of 11.18, below the 50-day MA of 11.74, and below the 200-day MA of 13.16, indicating a bearish trend. The MACD of -0.27 indicates Positive momentum. The RSI at 32.01 is Neutral, neither overbought nor oversold. The STOCH value of 11.85 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MHGU.

Meritage Hospitality Group Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
BDL	71 Outperform	55.47M	12.84	5.48%	1.84%	8.83%	41.90%
RRGB	55 Neutral	125.01M	-2.05	92.02%	―	-3.09%	-30.16%
STKS	47 Neutral	76.15M	-1.65	-8.10%	―	96.64%	-292.65%
THCH	47 Neutral	87.96M	-1.75	49.01%	―	-12.77%	52.05%
FAT	45 Neutral	35.79M	-0.15	39.58%	154.08%	0.96%	-57.29%
MHGU	40 Underperform	$67.00M	48.99	1.83%	―	-3.23%	-114.12%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%