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Just over a year ago, I wrote my first review of the restaurant industry, picking winners and advocating caution on others. A lot has changed since then, with the biggest event being last week’s Dunkin Donuts (NASDAQ:DNKN) IPO. We’ve also seen the loss Burger King and California Pizza Kitchen from the market and Wendy’s (NASDAQ:WEN)attempting to control their bleeding by cutting Arby’s loose.

During this time, restaurants as a whole have been on a tear, on the coattails of Chipotle Mexican Grill (NYSE:CMG) and Panera Bread (NASDAQ:PNRA). This is evidenced by graph below showing the Dynamic Leisure and Entertainment ETF (NYSEARCA:PEJ) offered by PowerShares, over the last two years. The fund covers consumer discretionary stocks, including restaurants, travel, and communications. Their biggest holding is Starbucks and their entire portfolio can be found here.


(Click to enlarge)

So with that in mind, I thought it was a good time to update the restaurant matrix. A couple of things before getting into the list; the numbers are credited to Yahoo and the list is limited to the larger companies, so several have been left off this particular list. Also, you’ll find that the majority of the P/E’s are trading between 14 to 20, with the exception of a few growth picks. With the debt ceiling looming over the economy, it is possible that we will see this constrict, but I would imagine that they would not drop as much as the entire market since during the recession fast food sales remained relatively consistent. There’s also the off-chance that the market jumps once the ceiling is raised, but that’s a completely different topic.

Breakfast

Ticker

Price

P/E

Mark. Cap

Div. Yield

Units

Denny’s Corp

DENN

$3.81

18.1

376M

0.0%

1,665

Bob Evan’s Farm

BOBE

$34.54

19.4

1.04B

2.3%

708

One of the interesting things about this group is that Bob Evan’s does not franchise and Denny’s does. This issue will come up again with Chipotle, but with smaller companies like Bob’s and Chipotle, the lack of franchising means that ownership will put forth a tremendous amount of time in picking premium locations that will ultimately be able to support the introduction of a new restaurant over the long term.

Pizza Places

Ticker

Price

P/E

Mark. Cap

Div. Yield

Units

Papa John’s Int.

PZZA

$31.21

15.8

803M

0.0%

3,687

Domino’s Pizza

DPZ

$26.87

17.8

1.63B

0.0%

9,351

I personally prefer Domino’s here. They are kind of vogue because they are a Cramer favorite and their current advertising campaign is very strong. They are also more exposed to the rest of the world, with a lot of restaurants opening up in India. Domino’s has essentially doubled in price over the last year or so.

Traditional

Ticker

Price

P/E

Mark. Cap

Div. Yield

Units

Red Robin

RRGB

$34.42

49.2

524M

0.0%

450

Ruby Tuesday

RT

$9.09

12.6

584M

0.0%

782

Buffalo Wild Wings

BWLD

$63.53

26.3

1.17B

0.0%

773

PF Chang’s

PFCB

$32.93

16.8

735M

3.0%

369

Cracker Barrel

CBRL

$45.11

11.2

1.04B

2.0%

595

Cheesecake Fact.

CAKE

$28.83

19.3

1.66B

0.0%

164

Brinker International

EAT

$24.02

14.2

2.04B

2.3%

1,550

Darden Rest.

DRI

$50.80

14.9

6.84B

3.4%

1,800

DineEquity

DIN

$52.10

0

965M

0.0%

3,270

If you are reading this than I assume you are aware of this but, Brinker is Chili’s, DineEquity is Applebee’s and IHOP, and Darden is Red Lobster, Olive Garden, LongHorn Steakhouse, and a few others. You should also notice Darden’s dividend, at 3.4%. This is the highest yield in the industry, combined with strong growth; and with Shark Week coming up consumers will be subliminally more inclined to eat seafood. P.F. Chang’s has a nice dividend too, but I don’t think it’s a great pick if the economy were to go any further south.

A few other interesting things of note: Ruby Tuesday has been getting killed recently. They have been opening up locations (including one five minutes from my house) and perhaps they’re realizing that there is way too much competition for them to get by copying other chains. The number of Cheesecake Factories is also of note. I would think that the country could sustain a few more and they also get a ton of free marketing from "The Big Bang Theory."

Fast Food Burgers

Ticker

Price

P/E

Mark. Cap

Div. Yield

Units

Sonic

SONC

$10.70

59.4

662M

0.0%

3,500

Jack In The Box

JACK

$22.72

18.0

1.13B

0.0%

2,200

Wendy’s Co.

WEN

$5.27

0

2.21B

1.5%

6,500

Somehow Sonic has been performing extremely well over the last year. It appears to be unwarranted, especially when gauged by their P/E. From personal experience, the food is no better than the alternatives and costs much more. McDonald’s and Wendy’s are much better lunch plays; how much is watching someone carry food on roller skates and eating in your car really worth? Speaking of Wendy’s, their sale of Arby’s was one of the biggest events of the past few months and didn’t really do much to the stock. It was no secret that Arby’s was an anchor and dropping them could really improve their financials in the future. Lastly, Jack In the Box also owns Qdoba, which is basically "the Edge" to Chipotle’s Bono.

Fast Casuals

Ticker

Price

P/E

Mark. Cap

Div. Yield

Units

Panera Bread Co

PNRA

$115.35

27.3

3.45B

0.0%

1,467

Chipotle Mexican Grill

CMG

$324.58

53.6

10.2B

0.0%

1,100

Fast casuals has been one the best plays over the last few years and by all current indications will remain as such at least for the near future. There has been a lot of talk recently regarding the shorting of Chipotle, which clearly would not have worked out. I first recommended Chipotle over a year ago, here, at around $145 and it’s done pretty well since. And again, one of the biggest reasons for this is their location selection. They do not franchise so the success or failure of each unit falls on ownership. This is what fights off their biggest criticism, the high prices. The stores are in areas where people will pay that much to eat a quasi-healthy burrito. They are all over Manhattan, but there are none in Camden, shocking.

Coffee Joints

Ticker

Price

P/E

Mark. Cap

Div. Yield

Units

Tim Horton’s

THI

$47.93

12.6

7.86B

1.5%

4,056

Starbucks

SBUX

$40.09

28.0

30.1B

1.3%

16,858

Dunkin Donuts

DNKN

$28.93

-

1.89B

0.0%

9,805

Krispy Kreme

KKD

$8.18

44.9

552M

0.0%

646

I am going to reserve thoughts on Dunkin Donuts until more is known about them, like at least a couple of earnings reports. They have an excellent product that has run the mom and pops out of a lot of areas and they are not pretentious like Starbucks. I read that they plan on opening a significant number of stores this year, especially overseas. I can already pass three of them driving a mile from my home, but in this situation franchising is every efficient. If a store is not performing, the brunt of it is felt by the store owner. I also think that it has been shown that the world can support both Starbucks, Dunkin Donuts, and Tim Horton’s (75% of which are in Canada). I am not as convinced with Krispy Kreme, which doesn’t really fit on a coffee list. Their doughnuts are delicious but with the country becoming slightly more health conscious they may need to find another avocation.

Fast Food Giants

Ticker

Price

P/E

Mark. Cap

Div. Yield

Units

Yum! Brands

YUM

$52.82

21.2

24.5B

1.9%

37,000

McDonald’s

MCD

$86.48

17.5

89.7B

2.8%

32,000

There’s no need to discuss at length either of these two. McDonald’s is three times bigger than any company listed and has an annually increasing dividend dating back for decades. They recently reported very strong earnings and reached a new all-time high. Yum! on the other hand is one of the best plays on the Chinese market, since American growth has all but come to a halt for them.

That wraps it up. As you can see, there are plenty of plays to be made, if you are looking for either growth or income investing. The economy has reached a bump in the road, but history has shown us that this leads to trade down eating rather than not eating, which would be dangerous of course and is not recommended.

Disclosure: I am long MCD, YUM.

Source: Restaurant Review: What's Cooking and What's Not