BJ's Restaurants, Inc. (NASDAQ:BJRI)

I love companies that can grow through cash flows. They seem to be executing well on their strategy and there's plenty of growth ahead.

There is absolutely no reason why this stock should have a $1.3 billion market cap. The company has tiny profit margins (bellow 1%). I define profit margin as free cash flow/revenues. The free cash flow last year was only $7 million, subtract from that the $4 million in stock based compensation expense and you only got $3 million in free cash flow. The trailing 12 months free cash flow is actually negative. In fact, over the last 10 years the company has never been very profitable (free cash flow has been negative almost every year.) Over the same 10 years net income has been positive, however, anyone who truly understands fundamental analysis doesn't pay too much attention to net income. It is just an accounting number and does not represent true profitability.

Seriously people! If you had the money to buy the whole business would you? I just don't think that a business with terrible cash flow, almost nonexistent profit margins, and awful return on capital is worth $1.3 billion. The assets on the balance sheet also don't justify this extreme valuation, since the majority of the assets are just restaurants, which would sell for a significant discount if the company were to liquidate its assets.

Overall, this is just a terrible business! The current valuation is extreme to say the least. This stock needs to drop at least 70% to make it even close to reasonable.