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Despite being considered a leader in the "eatertainment" industry, Dave & Buster's Entertainment (PLAY) has not been playing around since its IPO a little less than a year ago. Since the launch of that IPO, one that was priced at $16 per share, Dave & Buster's has soared approximately 166%, and currently trades around $42 a share.
Dave & Buster's has seen great success in other areas as well, and seems to be poised for a continuation of their successes in the future too. The company holds a Zacks Rank #1 (Strong Buy), and is in an industry that is currently ranked in the top 22% of all industries.
Another area where Dave & Buster's has succeeded would be in the meeting and, in this case, beating of expectations. The company has consistently beat the estimates for its earnings, revenues, and sales growth, with its latest quarter being one of its best. The company posted revenues of $217.3 million, which was a year-over-year increase of 20%. Dave & Buster's also posted an EPS of $0.40, crushing the Zacks Consensus Estimate of $0.23 by a whopping 73.91%.
With all the success the company has enjoyed, there comes the questions of why? Or How? Below are three major reasons that Dave & Buster's has been such a great stock for its investors.
A Unique Business Model
What really sets Dave & Buster's apart from other eateries is the way that it is structured, and where its revenues come from. The company shouldn't truly be considered a restaurant, mainly because it is so much more than that. The revenue from the restaurant section of the company actually makes up less than half of its revenue mix.
Where Dave & Buster's really sets itself apart is with its gaming. In its latest quarter, gaming made up nearly 54% of the company's revenue mix, and this is a large reason why the company is so successful, especially in comparison to its competitors. Games carry higher margins than other commodities like food. Since Dave & Buster's is more reliant on gaming than on food for its revenues, the company is less susceptible than its peers to food costs fluctuations like the ones seen in the last year.
Although the restaurant portion of Dave & Buster's remains important and a focus for the company, the gaming side of its business model is really what has been, and will likely continue to be, a driver of success and revenue growth in the coming future.
Technological Advances
Technology has been an area where Dave & Buster's has made advances, and one that has also helped lead to its success. It comes as no surprise that its technological advances have come in regards to gaming, especially given the advantage gaming provides the company over its peers. Just this past summer Dave & Buster's rolled out mobile apps of some its more popular games. While this may not seem that special or original, the interesting thing here is that players of these games are actually able to earn electronic tickets for their hard-earned wins, and can cash in these e-tickets at the company's real-world arcades.
The other technological advance the company has made comes in an effort to improve the bottom line, in the form of cost cutting. All but two of Dave & Buster's locations have switched to electronic tickets that are stored on swipe cards instead of the traditional printed tickets, which at the very least saves the company the $3 million it usually spends on the printed tickets.
As Dave & Buster's continues to grow, the company surely will look to make further advances in its technologies, and it will be an interesting thing for both customers and investors of the company to watch for.
Growth
A driver for many companies' success levels tends to be the rate or amount at which they grow. This is just as true for Dave & Buster's, as the company has experienced growth in several aspects that have helped it to reach such great levels of success. The number that is the most important though, and one that most investors really look for in a company like Dave & Buster's, is comparable sales growth.
This has been an area where Dave & Buster's has truly crushed many of its peers. In its most recent earnings report, the company posted an astonishing 11% comparable sales growth figure. One would be hard pressed to find many other companies posting a number like that at the individual store level, and that figure is really one of the biggest reasons Dave & Buster's has drawn such a buzz from investors and seen its stock price soar. Many companies who do not meet or fail to impress with their comparable sales growth figures, but this is clearly not the case of Dave & Buster's.
Bottom Line
All in all, Dave & Buster's and its investors have enjoyed a great level of success since its IPO last year, and that success is due to positive marks in each of the areas listed above. With a strong Zacks Rank, the strong industry of which the company operates, and an improving U.S. economy giving consumers more to spend, Dave & Buster's has a great chance to continue its high levels of success, and investors everywhere should be on watch as it tries to do so.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
