Q: As a follow-up to Paul’s question, A&W’s stock is back to where it was about 5+ years ago (way pre-pandemic) - why do you think this is and do you see a reason for this to change? I like the yield but opportunity or value trap? Thanks!
5i Research Answer:
The comparison of course does not include distributions, and AW is really a stock more for income, than growth, as it pays out most of its cash flow to unit holders. The uptick in interest rates certainly has not helped here. EPS has only marginally changed since 2018 though sales are up about 20%. Recently, inflation and labour issues have been a negative factor. We do think as inflationary/rate pressure abates the stock should do better. It has a good record of distribution increases and is a good operator in a competitive industry. We do not think investors should buy it with the expectation of high growth, however.