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A W Food Services of Canada Inc. (AW-T) has garnered mixed opinions from analysts, highlighting its strengths as an income stock due to its consistent dividend payments and relatively stable operations across varying economic conditions. The company has been reported to achieve a topline growth of 5% and a bottom-line growth of 10%, driven significantly by its ownership of national rights to Pret a Manger and a recent restructuring that improved liquidity. However, experts caution against anticipating high capital appreciation, as the company prioritizes dividends over growth, making it less attractive for investors looking for aggressive growth opportunities. The transition in the shareholder base introduces higher risk but also presents the potential for increased upside in value creation, especially with private equity and former management holding a substantial stake in the company. While the yield is appealing at 4.5%, the overall consumer landscape may pose challenges for future growth.
Successful, stable. Company structure now brings operating and royalty businesses together. Owns national rights to Pret a Manger. Topline growth of 5%, and bottom line growth of 10%. Big transition in shareholder base from royalty stream holders; now more risk, but more upside. Private equity plus former management still owns 60%, so incentivized to create value. Yield is 4.5%.
(Analysts’ price target is $38.00)The main concerns are related to same store sales growth slowing, but still remains positive over the last year. The general economic environment in 2023 also impacted results and were a concern, but improvements in the future here should help. Number of restaurants in the royalty pool was also flat in the fourth quarter. Debt load is still very manageable and we are not too concered on that front.
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AW.UN is a fundamentally strong fund, and is primarily an income stock. It has a yield of 5.8%, has grown its distributions by 3% annually over the past 10 years, and is reasonably valued at these levels. We feel that investors have opted to purchase 'risk-free' cash investments that have a similar yield to AW.UN, but much less risk given the changing interest rate environment. Although, we don't believe that this trend will last forever, and AW.UN has more upside potential than money market funds. For an investor looking for yield and a stable cashflow-generating business, we like AW.UN here and feel that it's at a good valuation today.
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AW.UN is now trading at 16x times' P/E. In the 2Q, AW.UN’s royalty income grew 4.8% to $12.8M compared to last year of $12.2M and same-store sales growth remains positive at 2.5%. Distributable cash per unit grew slightly 3.5% to $0.497, compared to last year of $0.48. The balance sheet is okay, with net debt of $35M. Total debt is around 1.3x times trailing twelve-month cash flow of $27M. AW.UN’s growth is quite resilient, the company has demonstrated pricing power in inflationary periods in recent years to maintain profit margins.
Compared to the industry, AW.UN is quite attractive, trading at only 16x, with consistently positive same-store sales growth and store openings. Unlike other restaurants, AW.UN did not make any recent acquisitions, and most of the earnings are paid out as distributions. We expect the company will continue to raise distributions due to the resilience in the franchise and its track record of value creation.
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Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. They announced a two year pilot to introduce the Pret brand in its restaurants. It would offer customers an alternative and the brand is popular abroad. A good move overall to diversify. Unlock Premium - Try 5i Free
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Likes the name and would be fine adding to it at current levels. Is well positioned and the management team is good. Results were okay last quarter, all things considered. Worst is most likely over. Unlock Premium - Try 5i Free
A W Food Services of Canada IncInstrument Symbol is a Canadian stock, trading under the symbol AW-T on the Toronto Stock Exchange (AW-CT). It is usually referred to as TSX:AW or AW-T
In the last year, 2 stock analysts published opinions about AW-T. 1 analyst recommended to BUY the stock. 0 analysts recommended to SELL the stock. The latest stock analyst recommendation is . Read the latest stock experts' ratings for A W Food Services of Canada IncInstrument Symbol.
A W Food Services of Canada IncInstrument Symbol was recommended as a Top Pick by on . Read the latest stock experts ratings for A W Food Services of Canada IncInstrument Symbol.
Earnings reports or recent company news can cause the stock price to drop. Read stock experts’ recommendations for help on deciding if you should buy, sell or hold the stock.
2 stock analysts on Stockchase covered A W Food Services of Canada IncInstrument Symbol In the last year. It is a trending stock that is worth watching.
On 2025-04-15, A W Food Services of Canada IncInstrument Symbol (AW-T) stock closed at a price of $31.2.
AW is relatively small, but we like it well enough. It has operated very well in differing economies, raised its dividend over time, and maintained its market share. However, we would view it far more as an income stock and not one of particularly high growth. Because of its high dividend, less money is available for growth initiatives, and the industry itself is not one of high growth. But we would view it as a small cap buy for income.
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