Adult arcade and restaurant chain Dave & Buster’s Entertainment Inc. (NASDAQ:PLAY) has seen a steady decline over the past year as the woes facing the restaurant industry finally started to creep into the company’s financials. PLAY stock initially bucked the downward trend that many of its peers were facing.

But over the past year it’s become clear that D&B isn’t immune to the public’s waning interest in going out to eat.

Now, Dave & Busters stock is trading at just $41.74, a far cry from it’s June highs of over $70 per share and that has given investors reason to reconsider the stock as a value play.

If you’re a trader in that camp, it’s worth keeping an eye on the company’s fourth quarter earnings announcement this Tuesday for signs that the stock can make the turnaround that analysts are expecting. Here’s a look at three things to watch when Dave & Buster’s reports.

Meeting Expectations

Thanks to an update earlier in the fourth quarter , we already know that growth at D&B has been slow. The holiday season wasn’t kind to the restaurant chain and the firm’s same-store sales dropped a disappointing 5% half-way through the fourth quarter.

Management updated its full year forecast to reflect that weakness saying that comps will likely come in negative and that profit will be between $108 million and $110 million.

Those figures certainly aren’t dazzling, but meeting or beating those forecasts is essential for PLAY stock. If the actual figures come in even lower than what management was predicting, it suggests that leadership doesn’t quite know what’s causing the slowdown and therefore won’t be able to make the necessary changes to fix it.

Investors should also be looking for CEO Steve King to comment on what exactly happened during the holiday quarter to cause such dismal results. In order to get behind a turnaround plan, investors first need to understand what went wrong and whether or not management’s growth initiatives are addressing that issue.

Store Growth

Part of the D&B team’s growth plans include expanding the company’s store footprint. Dave and Buster’s is expected to open 14 new stores by the end of 2018 and continue growing its footprint by 10% in the years that follow.

That strategy has both positives and negatives- on the plus side the company has a lot of room to expand throughout the US and some of the new locations are in untapped markets without a D&B location nearby.

However, several new locations are due to open in areas that are already home to a Dave & Buster’s, leading some to question whether the new openings will cannibalize traffic from existing locations and drag comps even lower.

The company is also trying out a smaller, more efficient store format- the initial results of which should be available during Tuesday’s earnings call. If the new stores that D&B opened over the past year have been efficient, it’s a positive sign for the company’s growth plans for the current year.

Business Building

Another big part of the reason to consider PLAY stock is the fact that Dave & Buster’s doesn’t have a whole lot of direct competition. The restaurant offers casual dining and drinks options together with a wide array of arcade-style games, something no competitors have countered.

The company generates more than half of its revenue from the gaming side of its business and the result has been a significant profit margin advantage against peers in the same sector.

At the moment, PLAY stock boasts an 82.81% profit margin- compare that to peers like Papa Johns International Inc. (NASDAQ:PZZA), whose profit margin is just 19.88% or even The Cheesecake Factory Inc. (NASDAQ:CAKE), which has a gross profit margin of 77.02%.

Not to mention PLAY is planning to take that figure even higher by simplifying its menu and making its restaurant side more profitable.

D&B is also looking to improve its gaming experience for customers by adding its own new virtual reality games. This move could be a good way to draw in additional traffic as those types of games can’t be played at home, giving people a reason to visit the store.

With that in mind, investors should be watching for management’s comments regarding its more streamlined restaurant business and updates on the new VR games.

The Bottom Line on PLAY Stock

The Dave & Buster’s business model is a solid one, but the restaurant has proven that it isn’t immune to the problems facing the industry. With that said, if management can address the reason for dropping sales and lackluster comps, the stock will likely make a big-time comeback in the months to come.

As of this writing Laura Hoy did not hold a position in any of the aforementioned stocks.