Last Update 09 Dec 25

DENN: Take Private Deal Will Anchor Shares Near Agreed Cash Offer

We are raising our Denny's price target slightly to approximately $6.25 per share from about $6.12, as analysts now anchor valuation more closely to the announced takeout price and see limited upside beyond the agreed acquisition terms.

Analyst Commentary

Analysts largely view the announced acquisition as a valuation ceiling in the near term, prompting a recalibration of ratings and forward expectations for the stock.

With the transaction price now serving as the primary reference point, research commentary has shifted from growth and multiple expansion potential to deal certainty, timing, and the low likelihood of a superior competing offer.

Bearish Takeaways

Bearish analysts argue that the agreed acquisition price effectively caps near term upside, limiting the appeal of owning the shares beyond a narrow merger arbitrage spread.
Several now see the risk reward skewed toward execution and regulatory risks on the deal closing, rather than operational upside from same store sales or margin improvements.
Expectations for a competitive bidding process have been tempered, with analysts viewing the probability of a materially higher offer as low, reducing optionality for equity holders.
The reset in ratings from prior positive stances underscores a view that, absent the transaction, fundamental growth and valuation expansion would not have justified meaningfully higher price targets.

What's in the News

TriArtisan Capital Advisors, Treville Capital Group and Yadav Enterprises signed a definitive agreement to acquire Denny's Corporation for approximately $350 million in cash, with total deal financing expected to reach about $640 million and closing targeted for Q1 2026 (M&A Transaction Announcements).
Oppenheimer downgraded Denny's to Perform from Outperform with no price target, citing the agreed $6.25 per share take private offer and a low likelihood of a competitive bidding process, and expects the deal to close in Q1 2026 (Periodicals).
Denny's disclosed that it will be unable to file its upcoming 10 Q with the SEC by the required deadline, highlighting near term reporting and compliance timing risk (Delayed SEC Filings).
The company reported no share repurchases in the most recent tranche period, but confirmed it has completed its long running buyback program, retiring over 15.1 million shares for about $160.73 million since 2019 (Buyback Tranche Update).
A special or extraordinary shareholders meeting has been scheduled for January 13, 2026, a key step for investor approval of the pending acquisition (Special or Extraordinary Shareholders Meeting).

Valuation Changes

Fair Value per Share, unchanged at approximately $6.13, remains closely aligned with the announced $6.25 take private offer.
Discount Rate, risen slightly from about 11.73% to roughly 11.81%, modestly increasing the required return embedded in the valuation.
Revenue Growth, effectively unchanged at around 3.72% annually, signaling no material shift in top line expectations.
Net Profit Margin, essentially flat at approximately 7.52%, indicating stable assumptions for long term profitability.
Future P/E, risen slightly from about 11.36x to roughly 11.38x, reflecting a marginally higher multiple applied to projected earnings.

New digital investments, loyalty program, and value-oriented promotions are positioned to increase customer engagement and drive topline and margin growth despite economic pressures.
Portfolio streamlining and margin initiatives aim to boost franchise profitability, reduce risk, and create a more resilient earnings base amid cost inflation.
Heavy reliance on value promotions, regional market concentration, and franchise model challenges limit sustainable growth, margin expansion, and effective execution of new initiatives.

Catalysts

About Denny's

Through its subsidiaries, owns and operates franchised full-service restaurant chains under the Denny's and Keke’s Breakfast Cafe brand names in the United States and internationally.What are the underlying business or industry changes driving this perspective?

The launch of a new one-to-one, points-based loyalty program in the back half of the year is expected to meaningfully increase guest frequency and average spend by leveraging first-party customer data and targeted offers; over time, this initiative should support same-restaurant sales growth and incremental margin expansion.
Sustained investment in digital platforms and off-premise channels-already driving 1.5% same-restaurant sales improvement-will further broaden market reach, tap into evolving consumer habits of digital ordering, and help offset dine-in volatility, supporting future revenue growth.
Continued emphasis on strong value-oriented promotions and menu innovation is drawing new and lapsed users into the brand-especially amid economic pressure and rising demand for affordable dining-positioning Denny's to benefit from long-term shifts in consumer behavior during downturns and supporting topline recovery.
Strategic portfolio rationalization (closure of underperforming units, targeted rehabilitation, and refranchising) has improved franchise average unit volumes by around 5% and will likely enhance system profitability, limit downside risk, and provide a cleaner base for earnings growth going forward.
Active margin improvement plans-including supplier negotiations, recipe changes, packaging optimizations, and additional cost savings-are expected to deliver up to 200 basis points of expense reduction in the next 12–18 months, helping to protect net margins from ongoing cost inflation.

Denny's Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Denny's's revenue will grow by 4.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 3.5% today to 4.8% in 3 years time.
Analysts expect earnings to reach $24.7 million (and earnings per share of $0.52) by about September 2028, up from $16.1 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.6x on those 2028 earnings, up from 16.1x today. This future PE is lower than the current PE for the US Hospitality industry at 23.9x.
Analysts expect the number of shares outstanding to grow by 0.33% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Denny's Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Denny's significant concentration in key markets like Los Angeles, San Francisco, Houston, and Phoenix exposes it disproportionately to regional macroeconomic volatility; persistent weakness or economic headwinds in these areas could drive ongoing traffic declines and limit comparable sales recovery, impacting long-term revenue and earnings growth.
The company's reliance on aggressive value promotions (e.g., BOGO offers, slams under $10, $2-$4-$6-$8 menu) to drive traffic during a tough consumer environment is margin-accretive now, but sustained dependence on discounting and LTOs can train guests to expect persistent deals, eroding pricing power and threatening future margin expansion and top-line growth.
Denny's is in a period of net restaurant closures to rationalize underperforming units, and while AUVs are improving, this also signals limited organic unit growth in core markets; market saturation and modest new unit development constrain future revenue and EBITDA expansion, particularly as international presence remains nascent.
Long-term cost pressures are ongoing: management anticipates commodity inflation of 3-5% and labor inflation of 2.5-3.5%. While some commodity costs (e.g., eggs) are declining, any sustained wage inflation or supply chain disruptions could outpace incremental savings from operational initiatives, resulting in compressed net margins and lower long-term earnings power.
The extensive franchise-oriented business model, while asset-light, reduces Denny's direct control over operational execution and guest experience, especially as it begins broad-scale digital and loyalty initiatives. Any disconnect between franchisor-driven strategies and franchisee adoption could limit the effectiveness of traffic-driving programs and slow top-line recovery.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $5.55 for Denny's based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $6.0, and the most bearish reporting a price target of just $4.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $517.0 million, earnings will come to $24.7 million, and it would be trading on a PE ratio of 16.6x, assuming you use a discount rate of 12.3%.
Given the current share price of $5.03, the analyst price target of $5.55 is 9.4% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Digital Investments And Loyalty Programs Will Increase Guest Traffic