1 Stock Is in the Spotlight for All the Right Reasons. Here's Why It's a Buy Now.
1 Stock Is in the Spotlight for All the Right Reasons. Here's Why It's a Buy Now.
John Ballard, The Motley FoolTue, October 20, 2026 at 12:50 AM UTC
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Image source: Getty Images.Key Points -
Cracker Barrel's fiscal fourth-quarter adjusted earnings of $0.99 a share easily beat Wall Street's $0.17 estimate.
New CEO David Deno is focused on cost savings and menu initiatives that can lift margins without relying on price increases.
The stock trades at a high 35 times forward earnings, but analysts have sharply raised their growth estimates since Deno took over.
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Cracker Barrel Old Country Store(NASDAQ: CBRL) is known for its country cooking and the gift shop by the front door, but brand recognition hasn't been enough in recent quarters. Fiscal 2026 was a tough year, with revenue down about 5%.
But a new leader is at the helm. CEO David Deno took over Aug. 10, 2026, and the stock has been on a tear, up about 180% from its 52-week low of $24.85 last December. It still looks like a buy.
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The restaurant chain just clobbered Wall Street's expectations last quarter, and those results show the comeback has real momentum.
Cost savings could fuel higher earnings over the next year
In its fiscal fourth quarter, ending July 31, 2026, Cracker Barrel reported revenue of $849 million and adjusted earnings of $0.99 per share. Analysts had expected about $835 million and $0.17 per share. That's a massive beat on earnings, suggesting something special is cooking behind the scenes.
The results reflect Deno's strategy in "doing fewer things better," as noted on the Sept. 23 earnings call. Management is allowing guests to upgrade to three sides as part of a broader menu initiative to increase profit margins without relying solely on price increases. Management is looking at several ways to lower costs to lift margins, which seems to be the biggest driver of the stock moving higher right now.
For fiscal 2027, management expects comparable-store restaurant sales -- sales at locations open at least a year -- to grow 3% to 5%. Comp sales growth should translate into earnings as management continues to execute its cost-saving initiatives.
Why the stock is a buy trading at a 35 forward P/E
Management expects fiscal 2027 adjusted operating profit to land between $180 million and $200 million, up approximately 29% over the prior year at the midpoint, and Deno expects meaningful improvement in profitability and cash flow, setting the business up for more profitable growth over the longer term.
The stock looks expensive, trading at about 35 times fiscal 2027 earnings estimates. But analysts have significantly raised their estimates, now calling for earnings to grow about 35% a year over the next several years. That's an attractive forward PEG ratio of 1, which typically indicates that a company's future earnings are undervalued.
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The risk is that traffic fell about 6% in the fourth quarter overall, so management still has work to do to win back guests. But it did indicate that traffic improved gradually during the quarter.
In the consumer discretionary sector, where many restaurant chains are competing for cash-strapped diners, Cracker Barrel's turnaround depends more on its own execution than on a stronger economy. If management continues to implement its plan and deliver on its fiscal 2027 guidance, Cracker Barrel stock could still be undervalued and worth buying right now.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Source: “AOL Money”
