Why Shares of Dave & Buster's Entertainment, Inc. Plunged 16% in September

By Markets Fool.com

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Image source: Getty Images.

What happened

According to data provided byS&P Global Market Intelligence, shares of arcade bar Dave & Buster's Entertainment, Inc. (NASDAQ: PLAY) fell 15.7% in September after the company reported full-year guidance that failed to inspire investors.

So what

Second-quarter revenue of $244.3 million was about in line with estimates and earnings of $0.50 per share, beat expectations by $0.06. But the focus of the quarter was on same-store sales.

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Same-store sales rose just 1% and that caused management to lower full-year same-store sales guidance from growth of 3.25%-4.25% to 2.25%-3.25%. Same-store sales are normally used as a measure of a company's health, and if they're growing, the leverage of the restaurant business can help grow net income faster than revenue.

Now what

A 1% decline in same-store sales isn't the end of the world and investors should keep in mind that Dave & Buster's is still expecting growth in 2016. Shares may have simply gotten ahead of themselves, especially as they were trading at 21 times earnings even after last month's drop.

For long-term investors, a disappointing quarter isn't worth panicking over. Dave & Buster's is still a growing business that's in a great position in the restaurant/entertainment space and that's worth holding onto right now.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Dave and Buster's Entertainment. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.