Brinker International, Inc. (NYSE:EAT) wiped out all the gains made in the previous day’s corrective bounce as it ended the last trading session with a loss of 1.13%. The decline added to the weekly loss and made the damage to the long term structure stronger. The volume of the day at 2 million against the daily average of 1.8 million was not very significant but that could be taken as natural pattern in a corrective sideways phase. The stock has just broken below a long term support line and despite any expected bounce around $45 levels, much more downside can be expected.
Brinker International, Inc. (NYSE:EAT) recently announced its 3Q2015 financial results, reporting an increase in revenue and a decrease in margins. Consequently, the stock price of the company has been declining at an increasing rate. Year-to-date decline, for the past 3 quarters, has been 8.1%, 9.5% and 17.5%. As such, analysts have started identifying EAT as a water-logged stock and it is getting wetter.
Currently, EAT has an average trade volume of 1.2 million, for the past 30-days. The situation for Brinker International is expected to remain bleak, despite good revenue growth, cash flow from operations and record earnings per share. However, this growth is only slightly above the industry growth average of 3.3%. Additionally, the company’s own revenue growth for the current quarter has only been 0.6% greater than the same period in the preceding year.
Similarly, the net-income growth has also been experiencing a significant increase and has outpaced the industrial average. The most recent quarter experienced a net-income growth of 98.5% as compared to the same period in the preceding year. However, the net-operating cash-flow for the last quarter had also increased by 13.24%. This figure was also above the industrial average of -4.9%. Unfortunately, the gross profit margins of EAT have been quite low. Currently, the figure stood at 21.23%. This has bought the net profit margins at 7.48%, which trails the industry average.
However, looking at the price to earnings and price to sales ratio, the company has been lacking as compared to its major competitors. ETFs have also been slowly losing interest in the stock. Based on the history of other water-logged stocks, such shares have the potential to bounce back and are extremely volatile. For Brinker that means that it would have to make significant changes in order to improve its margins and bring them in accordance with the revenues growth.
Brinker International, Inc. (NYSE:EAT) was trading at a share price of $47.27, after experiencing a decline of 1.1.3%, at the end of the October 22 session.