Panera Bread Company (NASDAQ:PNRA) as an investment has provided investors nice gains for a few years now, producing both earnings and revenue growth in the double-digit range year over year. Raising the question: Is Panera is still a good investment?
There is no question that Panera continues to grow and expand operationally. In the last few months of 2012, Panera expanded by another 32 bakery-style cafes with the number being split between 14 franchises and 18 company-owned locations. In total, Panera expanded by 123 new locations in the prior year, expanding its revenue base accordingly. In addition, company management is expecting to continue putting money back into further expansion, increasing the reach of the company's footprint in the convenience food market.
In terms of revenue generation, Panera stores are also producing and meeting high expectations with an average performance increase of over 5 percent annually for the last four years. In terms of return revenue potential, the company's loyalty program is also showing good signs of growth, doubling membership to 9.5 million by 2011. Currently the total customer figure of signups has now exceeded 13 million, yet the company still believes more growth is possible. Again, these figures represent potential return business since the loyalty benefits are not realized unless a person keeps going back regularly to a local Panera.
Panera has done so well in the last few years it has decided to put some of its cash into its ongoing stock repurchase program. With $20 million already bought back, the company still has the ability to buy back another $580 million in 2013. Each significant buyback only adds to the value of the stock by reducing the supply of shares for an in-demand, performing company.
For the first quarter of 2013, Panera's combined revenue has jumped again to $562 million. As a result, the earnings per share target has now been raised up to $1.78 per share with a growth target of another 19 percent over 2012's annual performance. This is an increase over the $1.64 per share realized at the end of the first 2013 quarter.
A year ago in April 2012, PNRA stock was in a rising position at $140 per share. Today, its current price point flutters just above $176 a share. However, what is really remarkable is the fact that the company has sustained a growth from $46 a share five years ago. Just in terms of market chart analysis, the stock is still on an upward trend. Panera does not yet pay out a dividend to shareholders but, given the growth the stock has produced annually, no one has really been too upset about the matter.
Opportunities to Buy In
Given the current track record of the stock, and the fact that Panera continues to be on a hot path of growth and earnings, it's not likely that it is going to give many opportunities for large discount buy-ins. Granted, it does show a pattern of climbing, retrenching a bit $10 to $20 a share, and then climbing again. These small dips serve as good entry points for the next leg up.
An investor is probably better served by regular PNRA stock purchases over time, building a position on a monthly basis. This will allow him to capture earlier growth while adding a bit more on a regular schedule. Incremental purchases then build a larger position over time while capturing profits early with each step. Or possibly selling puts to get into Panera at a discount. This will allow the accumulation of cash that will further reduce cost basis.
Will the stock suddenly fizzle like a bad commodity bubble? Given the company's current performance, net profit statistics, growth rate, and sales performance, that reality does not seem likely in 2013. Instead, Panera seems like a solid performer that is in a good position to keep rising, especially as the economy improves and people have more discretionary income to spend on convenience food. The prices are already such that you can have a decent meal on a budget and the loyalty program serves as a carrot on a stick to keep coming back.
PNRA stock is not currently at a discount and won't likely be sold cheap anytime soon. That said, the company shows strong promise to continue increasing its stock value for at least the next year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.