RAVE

We rate RAVE RESTAURANT GROUP, INC. (RAVE) as a Hold with a composite score of 50.8/100 at a current price of $3.00. 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 quality (70th percentile) and momentum (52th percentile), which together account for the majority of the composite score. Offsetting weakness in value (25th percentile) and investment (27th percentile) tempers our overall conviction. We assign a Narrow Moat rating (46/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: valuation compression risk if growth disappoints. 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.

RAVE RESTAURANT GROUP, INC. holds a lower-quartile position (#40 of 50) within the Wholesale Trade sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 50.8/100 places it at rank #1892 in our full 7,333-stock universe. At N/A in market capitalization, RAVE RESTAURANT GROUP, INC. is a small-cap player in the Wholesale Trade space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 3%, though momentum at the 52th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 68% (+45.3pp vs sector) narrow to operating margins of 26% (+22.4pp vs sector) and net margins of 20.6%, yielding a gross-to-net conversion rate of 30%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $3.00, RAVE RESTAURANT GROUP, INC. is trading at a premium to fundamental value. Our value factor score of 25/100 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 premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 17.2x (roughly in line with the sector median of 19.1x), EV/EBITDA of 13.2x (at a premium), P/B of 2.8x, P/S of 3.6x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to RAVE RESTAURANT GROUP, INC.. The company exhibits strong financial stability with a beta of 0.66, conservative leverage (13% D/E), and a stability factor in the 51th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.66 — while defensive, this may indicate limited upside participation in bull markets. 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 51th percentile and quality factor at the 70th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 68% provide a buffer against cost pressures; conservative leverage (13% D/E) limits balance sheet risk. 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 RAVE RESTAURANT GROUP, INC.'s capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 16.3%, disciplined leverage (13% D/E), best-in-class net margins of 20.6%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — RAVE RESTAURANT GROUP, INC. approaches this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. We note that the combination of 14.4% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, RAVE RESTAURANT GROUP, INC. receives a Hold rating with a composite score of 50.8/100 (rank #1892 of 7,333). Our quantitative framework assigns a Narrow Moat (46/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 45/100.

Our analysis supports a neutral stance on RAVE RESTAURANT GROUP, 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.