The Edge: Three Restaurants for the New Decade

This week, I decided to hand pick three stocks within the restaurant sector displaying best-of-breed characteristics of expansion and growth during what was a dismal ’09. Although other restaurants saw revenue declines, these three restaurants satisfied an increasing appetite in cities all over the country. Moreover, these restaurants proved they are off to a great start in the Next Decade.

B-Dubs: Buffalo Wild Wings (BWLD): ~$46/share

Why is there a line out the door? The demand: a great sports bar experience with chicken wings and a variety of sauces.

• BWLD sports a P/E of 28 and a Market Cap of $830 Million.
• Financial position: $52 Mill in cash and zero debt.
• Employs over 1,200 people.
• 620 stores in 41 states at the end of December ’09 vs. 560 stores in 38 states at the end of December ’08.

The earnings estimate is $.50/share vs. actual earnings of $.43/share the same quarter a year ago — a 16% year-over-year increase. B-Dubs’ quarterly earnings will be released February 11th, 2010.

Chipotle (CMG): ~$98/share

Why is there a line out the door? The demand: quick-service burritos, tacos, fajitas, and ‘burrito bowls’.

• CMG sports a P/E of 28 and a Market Cap of $3.11 Billion.
• Financial position: $238 million in cash and nearly zero debt on the books.
• Potential for a short squeeze if Chipotle surprises to the upside in their earnings report. As of December 31st, 2009, there is 42% short interest in the stock.
• Employs over 20,000 people.
• 911 restaurants as of the end of Q3 2009 vs. 837 stores of current restaurants in 33 states as of Dec. ’08. In 2010, Chipotle plans to open about 120-130 new stores.

The earnings estimate is $.79/share vs. actual earnings of $.52/share the same quarter a year ago — a 52% year-over-year increase. Chipotle’s quarterly earnings report is slated to be released on Feb 8th, 2010.

Panera Bread (PNRA): ~$68/share

Why is there a line out the door? The demand: ‘fast casual’ hand-crafted breads, sandwiches, salads and drinks.

• PNRA sports a P/E of 25 and a Market Cap of $2.15 Billion.
• Financial position: $173 million in cash and zero debt.
• Employs about 10,000 people.
• 1,362 stores as of the end of Q3 2009 vs. 1,325 stores as of Dec. 30th, 2008. In 2010, Panera plans to open 80-90 new stores.

The earnings estimate is $.88/share vs. actual earnings of $.84/share the same quarter a year ago — a 5% year-over-year increase. Panera’s quarterly earnings will be released on Feb 11th, 2010.

These rising restaurants have displayed three important growth measures during the past year: increasing revenue, expanding their number of stores, and maintaining healthy balance sheets during an unhealthy economy.

Disclosure: No positions in the stocks mentioned.

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