Why Dave & Buster's Stock Surges Wednesday

Entertainment Catering CompanyDave & Buster's (NASDAQ: PLAY)Dave & Buster's stock price soared after the company released its fourth-quarter 2023 earnings report on Wednesday. As of 2:30 p.m. EST, shares of Dave & Buster had risen 11% to a 52-week high.

Strong year for Dave and Buster's!

Dave & Buster's fiscal year ended on February 4th. It was basically a good year. Revenue grew 12% year-over-year to $2.2 billion, with net income of $127 million. While FY2024 net income did decline compared to FY2023 net income of $137 million, the margin of 5.8% was still impressive.

Dave & Buster's has also made significant progress in terms of outstanding shares. During the COVID-19 pandemic, the company was one of the hardest hit caterers, as its outlets were designed for in-person catering. As its revenues stagnated, management had to issue new shares to stay afloat. From the end of fiscal 2019 to the end of fiscal 2021, the number of outstanding shares of Dave & Buster's grew by 44% - a serious dilution for shareholders.

However, in FY2023, Dave & Buster's management repurchased 8.5 million shares, reducing the number of shares by nearly 181 TP3T, and the company is now authorized to repurchase $200 million in shares, or 71 TP3T of outstanding stock. So the shareholders seem to be encouraged that now that the company's business has recovered, they have been rewarded.

An Indicator of Concern

Dave & Buster's management does not give financial guidance. But one thing that is of interest is the company's same-store sales. The company's business is comprised of its namesake and Main Event brands. In FY2023, same-store sales for both brands declined by a total of $6%, with an even larger decline of $7% in the fourth quarter.

Dave & Buster's sales have been trending the wrong way lately, and that's a problem as it looks to open new stores. As much as that is true, it's a minor concern for an otherwise healthy business. And, if the company continues to make profits at its current rate and give back to its shareholders, there may be more upside for them in the future.

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Jon Quast does not own any of the aforementioned stocks.The Motley Fool recommends Dave & Buster's Entertainment.The Motley Fool has a disclosure policy.

Why Dave & Buster's Stock Surges on Wednesday