America’s addiction to food has propelled some restaurant stocks to record high prices. Valuations are such that even the slightest misstep and you could be looking at a stock that drops 20% to 30%.
Right now I’m watching three vulnerable restaurant chains that will report earnings this week. All are trading at peak prices and could stumble after earnings reports.
Last Monday, shares of Ruby Tuesday (RT) dropped some 8% after the company confirmed that its chairman had resigned and had sold his stock.
The sector remains strong as consumers continue to flock to casual dining. There’s no letup in sight for Americans’ tight budgets and time constraints, meaning these will remain primary drivers for growth.
The question I would ask is this: how far can these stocks fly?
At some point valuation matters, and for that reason I would be a bit cautious on the space.
Here are big three big restaurant industry names to sell before they report earnings in coming days: