Although Buffalo Wild Wings (NASDAQ:BWLD) trades at about 36 times earnings — about 1.5x the P/E ratio of the S&P 500 — its growth prospects are more than enough to make shares an attractive buy in my book.
BWLD stock, though up 28% in the last year, is trading sideways in 2015. There’s a serious risk factor afoot that could be sparking investor concerns: wing prices are up 63% from last year.
Don’t stick a fork in BWLD just yet — I expect this to be a top-tier growth stock for years to come.
Earnings Outperformer, Relentless Expansion Efforts
First and foremost, when it comes to its earnings history — those quarterly catalysts that can send stocks soaring or plummeting — BWLD has made a habit of beating the Street, topping analyst expectations in 6 of the last 7 quarters.
But, the more encouraging aspect making BWLD stock a top growth stock to buy for the long-term is the company’s ambitious vision. Simply put, Buffalo Wild Wings isn’t satisfied with its already-impressive market penetration. Boasting 1,082 stores in the U.S. and Canada today, BWLD wants to ultimately expand to more than 3,000 locations, a 177% increase from current levels.
Better yet, investors can rest assured that that sort of expansion is possible. The company plans to open a total of 112 new locations, boosting its store count by 10.4%. If it continues expanding at that pace, in just over 10 years BWLD will nearly triple its store count, achieving its goal of 3,000 locations.
The formula for growth in the restaurant business is an expanding store count and — more importantly — same-store sales growth. Last year, BWLD managed both, as same-store sales jumped 6.5%.
As B-Dubs increasingly adopts the franchising model, the company should be able to achieve sustainable growth at a far lower risk profile. At the same time, Buffalo Wild Wings is still opening plenty of company-owned stores — the company-owned/franchisee mix was about 50/50 last year for new store openings — so it still has plenty of exposure to the benefits that come with owning a location outright.
It’s true that the 63% surge in chicken prices won’t help margins and could put some short-term pressure on BWLD stock. But, I firmly believe that predicting the short-term fluctuations of the market is a fool’s game. As Warren Buffett likes to say: “In the short term, the market is a popularity contest. In the long term, the market is a weighing machine.”
Plus, if we’re really zooming in on the short term, there are still a few powerful bullish catalysts at work supporting BWLD stock.
It’s the middle of March Madness, after all, and Buffalo Wild Wings has turned itself into the archetypal mecca of sports enthusiasts looking for a fun place to get sloshed and watch the game.
I love the BWLD’s ambitions, and it’s certainly shown an ability to execute on its visions thus far. Expect more of the same from BWLD stock in the years to come.
As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
