Over the past six months, Dave & Buster’s stock price fell to $17.58. Shareholders have lost 10.9% of their capital, which is disappointing considering the S&P 500 has climbed by 22.9%. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Is now the time to buy Dave & Buster's, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.

Why Do We Think Dave & Buster's Will Underperform?

Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons you should be careful with PLAY and a stock we'd rather own.

1. Shrinking Same-Store Sales Indicate Waning Demand

Investors interested in Leisure Facilities companies should track same-store sales in addition to reported revenue. This metric measures the change in sales at brick-and-mortar locations that have existed for at least a year, giving visibility into Dave & Buster’s underlying demand characteristics.

Over the last two years, Dave & Buster’s same-store sales averaged 6.9% year-on-year declines. This performance was underwhelming and implies there may be increasing competition or market saturation. It also suggests Dave & Buster's might have to close some locations or change its strategy and pricing, which can disrupt operations.

2. Cash Burn Ignites Concerns

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Over the last two years, Dave & Buster’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 8.3%, meaning it lit $8.33 of cash on fire for every $100 in revenue.

3. Short Cash Runway Exposes Shareholders to Potential Dilution

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Dave & Buster's burned through $313.4 million of cash over the last year, and its $3.10 billion of debt exceeds the $12 million of cash on its balance sheet. This is a deal breaker for us because indebted loss-making companies spell trouble.

Unless the Dave & Buster’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Dave & Buster's until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

Final Judgment

We see the value of companies helping consumers, but in the case of Dave & Buster's, we’re out. Following the recent decline, the stock trades at 15.1× forward P/E (or $17.58 per share). This valuation multiple is fair, but we don’t have much confidence in the company. There are better investments elsewhere. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.

High-Quality Stocks for All Market Conditions

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.