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The fast casual dining sector has been on fire this year basically picking up where it has been ever since the March 2009 bottom. The three leading stocks of Buffalo Wild Wings (BWLD), Chipotle Mexican Grill (CMG), and Panera Bread (PNRA) have had virtually no pause in the rally for the last three years. Not even the market downturns in 2010 and 2011 could pull them down.

Though continuing to grow fast all these stocks face steep valuations and at some point the wall of large numbers will hit them. Chipotle already has a market cap over $11B and annual sales above $2.2B.

As an example, Darden Restaurants (DRI) with its main restaurants of Olive Garden and Red Lobster has succumbed to much lower multiples even though operating several successful chains. The company will approach $8B in fiscal 2012 revenue, but only has a market cap of $6.4B.

Naturally it's all about profit margins and future growth. Maybe these fast casual companies have a secret recipe or maybe each one will soon hit the growth wall. Chipotle could triple revenue without seeing a single point move up in the stock price. That is if the market ever gets the hint of slowing growth that will inevitably arrive in the form of a To Go order.

Below is a short description of each company plus a table comparing key metrics between the three high fliers:

Buffalo Wild Wings - founded in 1982, it operates and franchises the Buffalo Wild Wings Grill & Bar with 827 locations in 47 states. The restaurant has over $2B in system-wide sales. It hopes to surpass 900 restaurants in 2012 with the ultimate goal of over 1,500 locations in North America.

Chipotle Mexican Grill - founded in 1993, it operates over 1,200 restaurants mainly in the U.S. under the Chipotle Mexican Grill and a recently started Asian concept called ShopHouse. It expects to add another 160 units in 2012, bringing the total restaurants to nearly 1,400. The company continues to have one of the highest restaurant operating margins in the industry of around 26%.

Panera Bread - owns and franchises over 1,500 bakery-cafes under the Panera Bread, Saint Louis Bread, and Paradise Bakery & Cafe names mainly in North America. The company expects to add another 115 to 120 units in 2012, bringing the total restaurants operated to over 1,650.

Stock BWLD CMG PNRA
Market Cap $1.6B $11.8B $4.5B
Price/Sales 2.1 5.2 2.6
Forward PE 21.9 34.8 22.9
PEG Ratio 1.3 2.0 1.5
Comp Sales
-Q4'11
8.9% 11.1% 5.9%
Comp Sales
-2012
12.9% - Q1 4-6% 4.5-5.5%
Store Count
-Current
827 1,230 1,541

Though Buffalo Wild Wings and Panera Bread have much smaller market caps than Chipotle, both companies have gone partially with the franchise model. This will limite ultimate growth potential in their total size.

Noteworthy is that Buffalo Wild Wings has started off 2012 with the highest comp growth. Combined with the lowest PER ratio, it might just have the most upside potential. The other two are projecting lower comps, which could be the first step in multiple compression.

Again great operators, but even the best such as Darden eventually get too big for fast growth.

Disclaimer: Please consult your financial advisor before making any investment decisions. All financial data was sourced from Yahoo! Financial and should not be relied upon.

Source: Here's What's Cooking With The Fast Casual Dining Valuations