Unloved Stock Suddenly Gets Top Rating

(TheStreet) -- Sonic SONC was added to the 5-Star Stock List at Morningstar MORN at the start of 2011. The quick-service restaurant chain, which sells burgers, fries and shakes at some 3,000 drive-in locations, has steadily improved its business in the past few quarters. It's also cheap on the basis of earnings and cash flow. Morningstar values the equity at $13, suggesting a potential return of 44% as fundamentals strengthen. Sonic was founded in the 1950s by Troy Smith, a former milk-and-bread delivery man with entrepreneurial aspirations. He opened Troy's Pan Full of Chicken in Shawnee, Oklahoma in 1953 and, soon after, added a root-beer stand, The Top Hat Drive-In. The Top Hat quickly exceeded the Pan Full in profit, so Troy focused his efforts on perfecting the American drive-in diner. He added speakers for ordering at each parking space and hired carhops to deliver the food. A supplemental intercom system, which could play music, helped attract a younger crowd. Sales subsequently tripled. The first franchise opened in 1956 under the name Sonic, as Top Hat was already trademarked by another company. Continue reading the article.