Could This Restaurant Stock's Bad Luck Come to an End Soon?

Brinker International, Inc. (NYSE:EAT) is American multinational casual dining restaurant company. EAT is based in Dallas, Texas and currently owns, operates, or franchises more than 1,600 restaurants in 29 countries under the names Chili's Grill & Bar and Maggiano's Little Italy worldwide.

Brinker stock is down 7% year-over-year and has fallen more than 45% off its record high of $78.33, touched in mid-March. The shares just hit an  annual low of $40.50 on Nov. 3, and though they gapped higher just a few sessions later, the rally was stopped short by long-time pressure at the 30-day moving average. Year-to-date, EAT is off 24%. 

It is important to note that Brinker stock is beginning to reach an intriguing valuation once again. With the restaurant company losing nearly half its market cap, EAT's price-earning ratio has come down to 14.93. This is pretty standard for the restaurant industry. However, Brinker stock also has a forward price-earnings ratio of 10.75, indicating Wall Street analysts expect growth in earnings and reflecting a stronger valuation.

Fundamentally, Brinker stock has yet to fully recover from the pandemic’s impact. EAT's net income is still down 14% since fiscal 2019, allowing for the margin of recovery that is priced into its forward price-earnings ratio. Furthermore, Brinker's revenues have remained fairly stable, only dropping 4% in fiscal 2020 and increasing 13% since then. However, the restaurant company’s biggest downfall is perhaps its balance sheet. EAT's balance sheet includes $2 billion in debt and only $23.9 million in cash, leaving Brinker stock in an unfavorable fundamental position for the long-term.