Back at the end of September I made a call on Ruby Tuesday, Inc. (NYSE:RT) stating that the value on offer and the company’s cash generation more than offset recent poor performance. However, after releasing a dire set of fiscal first quarter results last week, does the stock still look attractive?

Ruby Tuesday

Ruby Tuesday stock

Well firstly, Ruby Tuesday, Inc. (NYSE:RT) still trades at a discount to book value and after recent declines this discount looks even more attractive. Based on numbers within the recent fiscal first quarter earnings report, Ruby has a book value per share of $8.11, or 33% away from current levels (intangible assets are negligible). In addition, during the quarter the company paid down $25 million in debt, mostly from asset sales.

Secondly, I originally noted that Ruby Tuesday, Inc. (NYSE:RT)’s cash flow was impressive and this remains the case. That said, the company did have a negative free cash flow during the quarter, but only by $2 million. Year-to-date the company has reported a free cash flow of approximately $15.7 million, 26% of EBITDA.

So all in all, the company is making progress and there is potential for a value investment here. However, one of the stand out numbers reported within the company’s most recent earnings release was the 11.4% same-store sales decline at company owned restaurants and 8.4% decline at franchised restaurants. What’s more, management are predicting further same-store sales declines of high-single digits for the second fiscal quarter, although sales are predicted to rise again in fiscal Q3 and fiscal Q4.

Ruby Tuesday President comments on earnings

Still, President and chief executive James J. “JJ” Buettgen commented in the company’s earnings press release that there had been a positive reception to new menu offerings at the end of the quarter. However, this does raise some questions, specifically, if reception was so positive why will it take nearly one-and-a-half quarters for this supposedly positive reaction to show through within results?

Also, Ruby Tuesday, Inc. (NYSE:RT)’s Lime Fresh brand continues to take a hammering as larger more successful competitor, Chipotle Mexican Grill, Inc. (NYSE:CMG) steals customers.

Ruby Tuesday’s property portfolio

Having said all of that, Ruby still has its property portfolio, which is worth $1.4 billion ($845 million excluding accumulated depreciation). There is also very little debt on the company’s balance sheet, as I have already mentioned. Additionally, Ruby has a current ratio of 1, about average for the restaurant sector so sort-term solvency is not an issue and the company is not burning through cash.

All in all, Ruby Tuesday, Inc. (NYSE:RT) is an interesting play. The company is almost self-sufficient and ticking over, although growth is illusive. Still, the company has its portfolio of property to rely on and management is selling off property to pay down debt, reducing interest costs and eliminating underperforming stores form the company’s portfolio. There is also scope here for the company to move to a business model similar to that of Burger King Worldwide Inc (NYSE:BKW). Burger King has turned all of its stores to franchises, a strategy which has pushed operating margins from 22% at the end of fiscal Q2 2012 to 48% at the end of fiscal Q2 2013. Scope for this as well as other operational changes gives Ruby plenty of opportunity.