As 2016 draws to a close, we can look back and say that the U.S. restaurant space has not been too enticing to investors. In fact, same-store sales growth has been rather dull in a difficult sales environment.
However, investors should not totally shy away from investing in this space. In fact, there are several companies with a decent performance history and strong fundamentals, that seem to be unperturbed by the plight, thereby signaling a profitable investment opportunity.
One such company is Dallas-based Wingstop Inc (WING) that continues to reflect strength in several areas ever since its IPO in Jun 2015 and should thus make a value addition to your portfolio.
Why is Wingstop a Solid Choice?
Stock Price Movement: Wingstop’s shares have outperformed the broader Zacks categorized Retail-Restaurants industry, year to date. While the stock gained over 30% the broader industry grew nearly 1% in the same time frame.
Earnings & Revenue Growth: Arguably, nothing is more important than earnings growth as surging profit levels is often an indication of strong prospects (and stock price gains) for the company in question.
While Wingstop has a historical EPS (earnings per share) growth rate of 26.7%, compared with the industry average of 10.8%, investors should really focus on its projected growth. Here, the company is looking to grow at a rate of 21.3%, thoroughly crushing the industry average, which calls for EPS growth of just 10.6% in comparison.
Propelling the earnings forward is the company’s solid revenue growth story. Notably, the projected sales growth for the current year stands at 17.5%, much higher than the broader industry’s estimate of 3.5%.
Solid Comps Growth & Various Initiatives: Wingstop, which operates as a chicken wings specialist, serves classic and boneless wings with bold flavors. The company has reported positive comps in all the prior six quarters on the back of menu innovation and solid unit development.
Going forward, the company’s investments in technology to grow online ordering along with migration to a national advertising platform, should aid in keeping up the trend of positive comps. Particularly, Wingstop continues to grow its online ordering mix and its partnership with a firm called Conversable, to make ordering more convenient for social media users, is expected to increase traffic.
Earnings & Revenue History and Estimate Revisions: Wingstop has reported six quarterly results so far, exceeding earnings and revenues expectations every time. In fact, the company has an average positive earnings surprise of 11.99% for the trailing four quarters.
Meanwhile, over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 climbed 1.8% and 3.2%, respectively. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the Zacks Rank #1 (Strong Buy) for the stock. You can see the complete list of today’s Zacks #1 Rank stocks here.
While looking over WING, here are three other stocks to consider in the restaurant space…
The Zacks Consensus Estimate for Potbelly’s 2016 earnings climbed 2.7%, over the last 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 19.58%.
The Zacks Consensus Estimate for Papa John’s 2016 earnings moved up 2.4%, over the last 60 days. Meanwhile, for the full year, EPS is expected to improve 19.9%.
Wendy’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 28.38%. Further, for 2016, EPS is expected to grow 23.9%.
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