Stock Watch

Ruby Tuesday: What Diners Want

Investing in restaurants can be tricky. Diners' palates can change seemingly overnight, making what was popular yesterday unpopular today.

Ruby Tuesday (RI) is hoping to minimize that risk. The casual-dining restaurant isn't afraid to change its menu around current trends to stay atop of what diners want. For example, it recently added a low-carbohydrate menu, and rolled out a new drive through service at most of its locations.

Casual dining restaurants are grabbing market share from fast food chains, but Ruby Tuesday isn't taking anything for granted. Tuning in to customers' tastes keeps them coming back and gives Ruby Tuesday a competitive advantage over its peers, say analysts at Dow Theory Forecasts. The restaurant has also worked to cut costs, increase efficiency and improve customer service. With sales rising and costs falling, margins look healthy.

The stock trades at 19 times consensus earnings estimates of $1.62 per share for fiscal 2004 (ending in May). That's lower than the industry average. Ruby Tuesday's clientele aren't the only ones enthusiastic about the chain -- of the 14 analysts covering the stock, ten rate it a "strong buy," and two rate it a "buy."

--Erin Burt

• Ask a Question

• Print
• Comments
• Email
• RSS