Lots of restaurants have come up all over the globe today, offering new varieties of fast foods and international cuisine. While some brands have lost their market share to these new players, there are some other brands that have clung on to their market share through high quality products and excellent growth rates. There are lots of factors by which we can evaluate the success of restaurant stocks. Compounded annual growth rates, EPS growth, P/E ratio etc. are some of the common factors. Let us now look at some of the best picks of the restaurant stocks here.
Phenomenal annual growth rate
If there is one restaurant stock that is well ahead of its peers in terms of compounded annual growth rate, it is the hugely successful Buffalo Wild Wings (BWLD, Financial). The joint, with chicken wings and beer as its major speciality dishes, is one of the most loved sports bar cum restaurants across the U.S. today. It has recorded an impressive growth rate of 23.04% in its revenue in the last five years. In the period between 2010 and 2014, Buffalo Wild Wings has recorded some mind-blowing figures.
- Revenues have increased from $613.3 million to $1516.2 million
- Earnings per share have gone up from $2.17 to $5.08
- No. of stores grew from 732 to 1082
- Same store sales grew at average annual rate of 4.74%
- No. of franchise stores increased slightly from 473 to 591; however royalty fee from these recorded a huge increase from $58.1 million to $93.2 million
- Share prices grew up from approximately $41 to a whopping $190
One of the best things about Buffalo Wild Wings is that, its financials show absolutely no debt at all. Revenues grew phenomenally mainly due to the increase in prices of chicken wings. The restaurant made the most of the rise in prices and is today the market leader in its sector. The stock movement of Buffalo Wild Wings for the last few months is seen below:
Revolution in casual dining
In terms of compounded annual growth rates, one stock that comes closely behind Buffalo Wild Wings is the market leader in the casual dining segment, Chipotle Mexican Grill (CMG, Financial). In the last five years, CMG reported a growth rate of 22.52% and the earnings per share have grown at a phenomenal rate of 32.17%. In the period between 2010 and 2014, CMG has grown at an aggressive pace as seen from the figures below:
- Revenues have grown from $6.61 billion to $21.24 billion
- Earnings per share saw an increase from $5.64 to $14.13
- Cash flow generated from operations increased to $429.5 million from $176 million
- Sales growth in the same store segment grew by a good 10.02%
- The number of outlets grew from 1084 to 1783
- Capital expenditure increased to $252.6 million from $113.2 million because CMG was involved in a high-profile expansion initiative
- Net profit margins saw an increase of 10.8%
- In these 4 years, share prices grew at a staggering rate – from around $90 to around $670 today
CMG figures in this list because the management believes that the best way to run the business is through providing high-quality food to the millions of customers who believe in CMG’s brand name. While all other players in the fast food and casual dining sector are looking to improve their business efficiency through cost management, CMG follows the policy of providing incomparable quality in its foods. Stock movement for CMG for the last few years is seen below:
Conclusion
The above stocks are aimed at providing maximum value to investors as they have showed an impressive rate of growth in the last five years. With new initiatives coming up, these stocks are likely to soar during this year, adding value to investors. Though many new players have come up in the market, these stocks will stand tall as the way they have been running their business models has been absolutely awe-inspiring.
