DRVN

We rate Driven Brands Holdings Inc. (DRVN) as a Hold with a composite score of 59.7/100 at a current price of $16.59. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (82th percentile) and value (75th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (29th percentile) and quality (60th percentile) tempers our overall conviction. We assign a No Moat rating (26/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Driven Brands Holdings Inc. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 59.7/100 places it at rank #729 in our full 7,333-stock universe. At $2.6B in market capitalization, Driven Brands Holdings Inc. is a mid-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

Despite positive momentum (70th percentile), revenue contraction of -12% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 100% (+40.4pp vs sector) narrow to operating margins of 9% (+5.7pp vs sector) and net margins of 4.6%, yielding a gross-to-net conversion rate of 5%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $16.59, Driven Brands Holdings Inc. appears undervalued relative to its fundamentals. Our value factor score of 75/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 28.4x (roughly in line with the sector median of 23.7x), EV/EBITDA of 13.7x (near the sector median), P/B of 3.5x, P/S of 1.3x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to Driven Brands Holdings Inc.. The stock presents a balanced risk profile: significant leverage (244% debt-to-equity) and the combination of leverage (244% D/E) and thin margins (4.6% net) amplifies downside risk. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (244% debt-to-equity); the combination of leverage (244% D/E) and thin margins (4.6% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 82th percentile and quality factor at the 60th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 100% provide a buffer against cost pressures; above-average stability (82th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Driven Brands Holdings Inc.'s capital allocation as Poor. Key concerns include elevated leverage (244% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Driven Brands Holdings Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Driven Brands Holdings Inc. receives a Hold rating with a composite score of 59.7/100 (rank #729 of 7,333). Our quantitative framework assigns a No Moat (26/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 63/100.

Our analysis supports a neutral stance on Driven Brands Holdings Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.