Nathan’s Famous (NATH) Margin Compression Challenges Bullish Long Term Earnings Narrative

Nathan's Famous (NATH) has reported Q3 2026 revenue of US$34.3 million with basic EPS of US$0.75, putting the latest quarter against a year when trailing twelve month EPS stands at US$5.24 on revenue of US$157.8 million. Over the past few quarters, the company has seen revenue range from US$30.8 million to US$47.0 million, while basic EPS has moved between roughly US$0.75 and US$2.18, giving investors a clear view of how earnings track against the top line. With a net profit margin of 13.6% over the last year compared with 16.2% the year before, the story this quarter is all about how much of that revenue is sticking as profit.

See our full analysis for Nathan's Famous.

With the headline numbers on the table, the next step is to see how they line up with the most widely held narratives around Nathan's Famous and where the recent margin and earnings trends might be telling a different story.

Curious how numbers become stories that shape markets? Explore Community Narratives

Margins Under Pressure At 13.6%

• The net profit margin over the last 12 months is 13.6%, compared with 16.2% a year earlier, and that sits alongside trailing twelve month EPS of US$5.24 on US$157.8 million of revenue.
• What stands out against a more positive view is that, while earnings have grown 14.2% per year over the past five years, investors now have to square that history with a year of negative earnings growth and a margin line that has moved from 16.2% to 13.6%, which challenges a simple bullish story built only on long term averages.
  • The five year 14.2% annual earnings growth rate lines up with the current US$21.4 million of trailing twelve month net income, yet the most recent year has broken that pattern with a decline.
  • Putting together the 13.6% margin and US$157.8 million of revenue shows the business is still generating solid profits, but the step down from the prior 16.2% margin is a clear data point cautious investors can point to.

Investors who want to see how others are framing this trade off between long term growth and recent margin compression can check out the wider conversation in the Curious how numbers become stories that shape markets? Explore Community Narratives.

P/E Discount Versus Peers

• The current P/E of 19.3x sits below both the peer average of 22.6x and the US Hospitality industry average of 21x, so the market is valuing Nathan's Famous at a lower earnings multiple than many similar names.
• Supporters of a more positive angle may point out that this lower multiple sits beside five year compound earnings growth of 14.2% per year and argue the combination of growth history and a below peer P/E heavily supports a bullish case, although the most recent year of negative earnings growth shows that story is not one way.
  • The P/E gap against peers, 19.3x versus 22.6x, is clear in the data and gives bulls a concrete valuation gap to talk about.
  • At the same time, the trailing twelve month net profit margin at 13.6%, down from 16.2%, and the fact that earnings fell over the most recent year give skeptics specific figures to use when they question how much weight to put on the five year 14.2% growth rate.

DCF Gap And Debt Load

• The current share price of US$101.20 is above the DCF fair value estimate of US$83.51, and the company is also flagged as carrying a high level of debt.
• Critics highlight that, while the lower 19.3x P/E can look supportive, the stock trading above the US$83.51 DCF fair value and the combination of margin compression from 16.2% to 13.6% with elevated leverage collectively back a more bearish narrative that the current price leaves less room for error.
  • The gap between the US$101.20 share price and the US$83.51 DCF fair value estimate gives bears a specific spread to focus on when they talk about valuation risk.
  • Pairing that valuation gap with the recent year of negative earnings growth, despite US$21.4 million of trailing twelve month net income, supports the argument that investors are paying above a cash flow based estimate while profits have recently stepped back.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Nathan's Famous's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Recent margin compression from 16.2% to 13.6%, a year of negative earnings growth, and a share price above the DCF estimate all point to valuation and risk pressures.

If that mix of stretched pricing and higher leverage has you wanting a sturdier footing, check out 86 resilient stocks with low risk scores to quickly focus on companies with more resilient profiles.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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