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By Rayk Riechmann

How about steak and a show for dinner and best-in-class growth for dessert?

Investors can enjoy just that with The ONE Group Hospitality, Inc. (Nasdaq: STKS), operator of 167 full-service, experience-driven dining establishments under a mix of ownership models across 32 states and 12 countries. Demand for experiential upscale meals, also known as “vibe” dining, is increasing, especially among higher-income households. STKS is perfectly positioned to benefit from this shift with an outstanding brand portfolio of STK Steakhouse and Kona Grill — along with newly-acquired Safflower Holdings, parent of world-famous Benihana (known for hibachi-side chef performances) and RA Sushi.

Multiple forces fuel our bullish outlook for 2025. First is the $365 million Safflower acquisition last year, which drove a 100% rise in revenue and a 130% increase in Ebitda. Benihana brings more-than 80 venues to the STKS portfolio, which also has some franchise restaurants enabling asset-light expansion internationally. The margin profile of these restaurants is even better than the existing portfolio, which will help boost overall profitability.

The deal also generated efficiencies: Adjusted G&A expenses and cost of sales declined as a percentage of sales, reflecting successful synergy realization. Diversification into digital and off-premise sales with Benihana (takeout and delivery 12% of revenue) and RA Sushi (20% digital and off-premise sales) balances the predominantly dine-in nature of STK and Kona Grill.

To reach its long-term growth target of clocking $5 billion in system-wide revenue, the company devised a strategy focused on both financial prudence and growth. STKS plans to drive higher same-store sales, trim overhead costs, and expand its footprint through licensing and management deals.

Throughout 2024, institutional owners such as Goldman Sachs, JPMorgan Chase & Co, and Jane Street have increased their ownership. Some made very substantial purchases, such as Deutsche Bank which increased its stake by 839%.

For the moment, STKS shares are on sale. The company trades at an enterprise value, adjusted for debt, of just 5.2 times forward Ebitda. That’s less than half the multiples commanded by Brinker International, Inc. and The Cheesecake Factory Inc.

Guests are drawn in by sushi, steak, and seafood – and investors by an attractive valuation with plenty of growth levers in place. Appetites for delicacies and returns are satisfied equally. Click below to read our detailed initiation report.

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