MTY Food (MTY) fell 7%, giving some of Monday’s ~15% gain back after the company confirmed it initiated a strategic review that could end in a sale. The decision follows years of underperformance…

… driven by the company’s recent push into corporate stores through M&A, which has weighed on margins given the economics are worse than the franchising business.

More recently, concerns over the health of the U.S. consumer (roughly two thirds of revenue) have added additional pressure - with sales down in the prior two quarters...

… pushing shares towards a trough EBITDA multiple that likely has private equity circling, given recent interest in platforms like Papa John’s, Dave’s Hot Chicken, and Denny’s. Taking the ~9x NTM EBITDA multiple Denny’s was clipped at…

… and handicapping it ~10% for MTY’s relative complexity, I wouldn’t be surprised to see the equity valued at ~$1B+. Let’s see.

About Bullpen: Bullpen Finance Inc. publishes content on Canadian markets and provides paid research coverage of select Canadian issuers. Bullpen is paid in cash by covered issuers, does not accept stock or options, does not hold positions in covered securities, and does not conduct investment banking business. Bullpen and LodeRock Advisors Inc. are affiliated; LodeRock provides investor relations services to issuers, some of whom are covered by Bullpen Research. When a post discusses a covered issuer, a specific disclosure appears at the top of the post. This post is published for general information purposes. It is not personalized investment advice and is not tailored to any individual reader’s circumstances. Bullpen is not a registered investment adviser or dealer. For full disclosures, including analyst certification, jurisdictional statements, and conflict of interest policies, please see our Legal & Disclosures section on our website.

You might be interested in…