TAST - Carrols Restaurant Group: High-Risk High-Reward

• Carrols Restaurant Group is one of the worst-performing restaurant stocks this year, down 53% vs. a 16% gain for the restaurant industry group.
• This significant underperformance can be attributed to rising costs that have put a dent in margins, with wages up 13% year-over-year in Q3, and commodity inflation coming in at 9.2%.
• At a share price of $2.90, much of this negativity looks priced in, with Carrols trading at one of its lowest revenue multiples in history, and close to 7x EV/EBITDA.
• However, Carrols remains a high-risk, high-reward bet in a market with several low-risk, high-reward bets, making it a much riskier way to buy the dip in the recent sector-wide correction.

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