Outperforming Restaurant Stock With Affordable Options

What investors should know about RRGB ahead of earnings

Feb 19, 2021 at 12:50 PM
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Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is an American chain of casual dining restaurants that operates through its subsidiary, Red Robin International, and under the trade name, Red Robin Gourmet Burgers and Brews. Red Robin stock has steadily recovered over the past year after falling to a record low low of $4.04 in March. Red Robin stock has since experienced incredible rebound growth, increasing over 50% to date. At last check, RRGB was up 2.4% to trade at $29.34.

RRGB is scheduled to report in the earnings confessional on Tuesday, Feb. 23. Red Robin has beat earnings expectations just once in its last four quarters. At this time, Wall Street analysts project RRGB will report an earnings per share (EPS) of -$1.10 in the upcoming earnings report.

For the fourth quarter of 2019, Red Robin missed analysts’ expectations by a margin of $0.19 and reported earnings of -$0.36 per share. For the first quarter of 2020, RRGB reported a major drop in EPS down to -$6.66 and failed to meet expectations by a huge margin of $5.56. Red Robin stock increased its EPS to -$3.31 for the second quarter of 2020 and still missed expectations by $0.04. In its most recent quarterly report, RRGB increased its earnings to -$0.19 per share and beat earnings expectations by a decent margin of $1.37.

From a fundamental point of view, it is difficult to justify Red Robin stock's current value. However, strong earnings performance to end the fiscal year could help RRGB make a case for its future potential growth. Nonetheless, there are too many red flags at the moment to buy ahead of earnings.

These options are reasonably priced at the moment too, per the stock's Schaeffer's Volatility Index (SVI) of 93%, which stands higher than 9% of all other readings in its annual range. This implies that options players are pricing in relatively low volatility expectations at the moment. 

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