Del Taco Stock Needs the Boost from Beyond Meat Partnership

Taking a closer look at Del Taco’s balance sheet and fundamentals

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Del Taco Restaurants, Inc. (NASDAQ:TACO) is a Mexican-American inspired fast-food restaurant chain that operates approximately 580 locations in the United States. Most recently, Del Taco has been focused on partnership efforts with high-profile companies like Beyond Meat (BYND) and DoorDash (DASH). While Del Taco first introduced Beyond Meat products to its menu innovations back in 2019, the company now hopes to reap the benefits of its early adoption with the growing popularity of imitation meat.

Del Taco stock has dug out of its March Covid-19 crisis lows near $3, but the double-digit area remains elusive since Oct. 15. Year-to-date, TACO is up 16%, with Oct. 16's 22% post-earnings bear gap finding support at the shares' 120-day moving average.

TACO Stock Chart

Options traders have been targeting puts with gusto. This is per TACO's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), that ranks six percentage points from an annual high. This indicates a much healthier-than-usual appetite for long puts of late. Echoing this, the stock's Schaeffer's open interest ratio (SOIR) of 1.66 sits in the 94th percentile of its annual range, meaning short-term option traders have rarely been more put-biased. 

Regardless of direction, now could be a good time to weigh in on TACO's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 59% stands in the low 9th percentile of all other readings, implying that options players are pricing in relatively low volatility expectations at the moment. 

From a fundamental perspective, an investment in Del Taco stock presents many issues for potential investors. The company’s balance sheet is far from what an investor wants to see. Del Taco currently holds $396.82 million in total debt with just $5.36 million in cash and cash equivalents. Del Taco has also seen a significant decrease in its net income over the past few years.

Back in 2017, the company generated nearly $50 million in annual net profit. Today, Del Taco is deep in the red, having taken $211 million in net losses over the past twelve months. Everything isn’t entirely bad for Del Taco stock, though; Prior to the Covid-19 pandemic, the company was consistently growing its annual revenue. And yet even in the (hopefully) final throes of the coronavirus ,Del Taco’s revenue is still up $20 million from 2017.

 

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