Get Premium to unlock powerful stock data

Portillo's Has Investors Buzzing in the Wake of Its IPO

Iconic 'street food' chain melds nostalgia and innovation

Author's Avatar
Dec 30, 2021
Summary
  • Ghost kitchen, drive-thru only prototype ignite hopes for the future.
  • CEO targets 600 units nationwide.
Article's Main Image

In the wake of its $405 million initial public offering on Oct. 21, Portillo's Inc. (

PTLO, Financial) has got investors taking a long, hard look – with some delighted with what they see.

Founded by Dick Portillo in 1963, Portillo’s serves iconic Chicago street food through high-energy, multichannel restaurants designed to ignite the senses and create a memorable dining experience. Its menu features all-American favorites such as Chicago-style hot dogs and sausages, Italian beef sandwiches, chopped salads, burgers, crinkle-cut french fries, homemade chocolate cake and milkshakes.

The stock has seen movement during its short history, with its share price up 6% leading up to Christmas and 20% during Christmas week. It is trading today at $38.24, up 3.85%. It opened the day at $36.82.

1476638300600233984.png

Only a small part of its share (28%) went to new investors, with the rest in the reassuring hands of Berkshire Partners, which purchased the concept seven years ago.

Another point in the chain’s favor is its bold expansion strategy, which in targeting the entire country will see it go from 69 restaurants to 75 in 2022. CEO Michael Osanloo has said that the ceiling will be about 600 units. "An IPO in my mind is not a destination for us, it's just a start of what we're trying to accomplish," he said in an interview. "We will be measured by how we perform as a company over the next 10 to 12 quarters.”

Investors are also pleased with the company’s penchant for innovation. The chain operates a ghost kitchen in Chicago to help handle the crushing traffic counts and will roll out a drive-thru only version in Joliet.

According to Nasdaq.com, “The stock market is currently optimistic about the eatery chain,” adding that several indicators appear “bullish.” One reason given was the addition of 30-year veteran Paulette Dodson to its board. In addition, “Top-line metrics for Portillo's are strongly positive, with revenue jumping 15.3% year over year to $138 million. Both a 6.8% surge in same-restaurant sales and five new restaurant openings contributed to the gain.”

1476638748790976512.png

CNBC’s “Mad Money” host Jim Cramer said recently that he finds long-term potential for newly public companies like Portillo’s, suggesting interested investors can buy their stocks under certain conditions.

Cramer said he views Portillo’s as “an attractive story over time as it grows its store footprint nationally.” The host said he was "impressed" by Portillo’s fundamentals, especially the average unit volumes and restaurant-level margins. The fast-casual chain is also profitable, but he advised that "if the stock keeps getting hit, here’s what you do: You buy some, and you gradually buy more into weakness because I think it could be a great long-term restaurant story.”

According to Seeking Alpha's Taylor Dart, Portillo’s “is already posting positive annual earnings per share, unlike peers like First Watch (

FWRG, Financial) and Sweetgreen (SG, Financial).” Based on estimates for fiscal 2022, the company is anticipating a new all-time high in annual earnings per share of 34 cents. Projections for 2023 are 46 cents per share. If it is able to meet these targets, the stock will trade at more than 80 times forward earnings versus a more established name like Chipotle (CMG, Financial), which is trading at around 42 times 2023 earnings estimates.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
Rating:
0 / 5 (0 votes)
Author's Avatar
WRITTEN BY

GuruFocus Screeners

Related Articles

Q&A with Gurus