ZOES Stock a Tasty Buy Before Zoe’s Kitchen Posts Earnings

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Zoe’s Kitchen (ZOES) is a trendy “fast casual” restaurant that isn’t as well-known as stocks like Chipotle (CMG) or Panera (PNRA). But based on outperformance of ZOES stock this year and hopes of a big beat after Zoe’s Kitchen earnings hit the market in a few weeks, investors should quickly get to know this eatery better.

ZOES-stockZOES stock is a tasty addition to your portfolio before its earnings release at the end of August.

For starters, let’s look at momentum — including the 48% or so Zoe’s Kitchen has tacked on year-to-date and the 80% gains ZOES stock has seen since its IPO about a year ago.

That’s enough to turn any investor’s head. But what’s really encouraging is the growth that is driving this stock higher, including four consecutive earnings beats in each quarterly report as a public company — capped off by a surprise profit of 4 cents in Q1 vs. forecasts of a one-penny loss.

This sooner-than-expected profitability is great news. Also encouraging in Q1 were same-store sales that surged 7.7% to drive a 36% increase in overall revenue year-over-year. ZOES stock increased guidance as a result and rallied strongly across both June and July.

ZOES Stock Is Just Getting Started

What makes consumers so attached to Zoe’s Kitchen? Well, in part it’s the Mediterranean flavors that you can’t get at other joints. (At least, not until PNRA gets wise and puts hummus on the menu.) But it’s also the fresh and healthy vibe, with scratch-made items and a quest for preservative- and additive-free menu items that are heavy on the produce and light on the grease.

You’ll have to experience one yourself to get the whole picture — and that may be challenge, given that Zoe’s Kitchen only has about 150 locations in 16 states. But ZOES stock went public to ramp up its locations in a hurry, with 50% more restaurants in 2014 than in 2013 and plans to double its restaurant base across the next four years.

In the long term, ZOES believes it can successfully service 1,600 locations without spreading itself too thin — which means 10-fold growth if Zoe’s Kitchen can deliver.

Consumers are fickle, and restaurant stocks are known for boom and bust cycles thanks to the risk of overexpansion. However, Zoe’s Kitchen has amazing growth metrics right now and a clear brand appeal to health-conscious consumers.

I’d buy ZOES stock with confidence right now — before it blows the doors off again with another big earnings surprise.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/zoes-stock-a-tasty-buy-before-zoes-kitchen-posts-earnings/.

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