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Continuing its long tradition, Panera Bread Co (NASDAQ:PNRA), beat Q4 earnings estimates both on the top and bottom line- sending its stock sharply higher in after hours trading.

The problem, however, is that the stock has been sharply higher in the last four years. Does this mean that it has run ahead of itself?

(click to enlarge)

I don't think so, as the company commands reasonable valuation, and is still in a growth stage, as compared to McDonald's and Starbucks that are approaching maturity.

Company

Forward PE

Operating Margins

Qtrly Revenue Growth (yoy)

Qtrly Earnings Growth (yoy)

Return On Assets (ROA)

Starbucks (NASDAQ:SBUX)

20.92

13.54%

11%

0.10%

14.45%

McDonald's (NYSE:MCD)

15.96

30.29

-0.20

-3.50

15.71

Dunkin' Brands Group (NASDAQ:DNKN)

23.67

37

5

298

4.92

Panera Bread

23.26

7.81

16.80

26.60

15.22

This conclusion is further supported by another metric, SWOT Analysis.

Panera Group SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Still managed by the company founder; broad menu that covers breakfast lunch and dinner; new-more spacious stores

Management risk of losing market focus as it tries to cater to every age group.

Plenty of room to grow- the company is still in the early stages of its expansion. It just opened a store in Manhattan

Competition from; McDonald's; Dunkin Brands; Panera Bread; and Yum Brands

I would further like to add that Panera Bread is a better bet than Chipotle (NYSE:CMG), for three reasons:

First, despite its robust earnings and stock run-up, Panera Bread is below the momentum crowd's radar, as reflected in the trade volume of the stock. Second, Panera's low PE, nearly 60% below that of Chipotle, makes the company less expensive than Chipotle. Third, Panera's smaller size (in terms of sales) gives the company more room to grow and attain economies of scale.

Company

Average Daily Volume

Sales

CMG

667,000

2.63B

PNRA

365,000

2.05B

A few words of caution: Rapidly growing companies occasionally run in to bumps that cause temporary setbacks that scare short-term investors. This is especially the case for companies at a time of food inflation. Though Panera has demonstrated an exceptional ability to manage food costs in the past, it might not manage to do so in the future.

The bottom line: Panera Bread is still a growth story that will reward long-term investors, as McDonald's (MCD) and Starbucks (SBUX) did in the past.

Source: What To Do With Panera Bread's Stock