A couple of years have passed since the coronavirus pandemic, but Americans continue to favor dining out. Moreover, that trend has persisted despite the crippling inflationary effect, highlighting the importance of the best restaurant stocks to buy in April.
Last month’s consumer price index (CPI) report showed a 0.1% sequential increase in restaurant purchases and a 4.5% bump on a year-over-year (YOY) basis. These numbers again, point to an enduring trend that will continue to benefit the restaurant industry. Moreover, the 31% 6-month gain in the AdvisorShares Restaurant ETF adds more weight to the argument.
However, with restaurant stocks rallying, many may be overvalued, so it’s imperative to separate the wheat from the chaff.
Potbelly Corporation (PBPB)
Its been a challenging couple of years for sandwich shop chain Potbelly Corporation (NASDAQ:PBPB). Like most of its peers, the restaurant chain struggled for obvious reasons during the pandemic but with the pent-up demand post-pandemic, it saw a healthy uptick in sales. However, with crisis firmly in the rear-view mirror, its top-and-bottom-line metrics continue to normalize.
However, recent results point to a resurgence of sorts, with its fourth-quarter (Q4) report blowing past revenue estimates. Moreover, same-store-sales growth came in at the higher end of its guidance. Furthermore, it is looking to make the most of its momentum, going full-steam ahead with its franchising plans. It recently finalized four multi-unit development agreements and opened up 18 new shops in new and existing territories.
Consequently, Tipranks’ analysts assign a ‘strong buy’ rating to the stock, expecting a 34% upside from current prices.
Shake Shack (SHAK)
Hamburger chain Shake Shack (NYSE:SHAK) has been one of the most consistent businesses in the restaurant industry. A glance at its historical financials shows almost a 20% 5-year average sales growth and 48% EBITDA growth over the same period.
Moreover, its recent results continue to impress. It ended Q4 with system-wide sales rising 21.4% compared to the prior-year period to $442 million. More importantly, its net income is $6.8 million, compared to a sizeable $7.76 million net loss in the same period last year.
The company’s success is linked to its aggressive expansion, with 40 new locations opening in the past year alone. Furthermore, it continues to embrace technology, introducing kiosks to improve margins while increasing marketing efforts to add to its brand equity. These strategic moves and the restaurant chain’s tremendous growth potential in untapped U.S. markets position Shake Shack for lasting success.
Cava (CAVA)
Cava (NYSE:CAVA) fills a significant gap in the Mediterranean fast-casual dining sphere. It wrapped up another solid year in 2023, posting an impressive 18% jump in same-restaurant sales for Q4, fueled by solid footfall. Sales overall were up a whopping 52.5% YOY to $175.5 million, driven by 95 net new restaurant openings.
Furthermore, it ended the year in the green, generating a superb $13.3 million net profit, a significant improvement over the loss it generated in the year prior. Its profitable store-opening model ensures that it continues posting impressive business-wide profit margins. Also, eight positive revised EPS estimates have been in the past three months, pointing to another solid quarter ahead.
Additionally, the company has proactively laid off AI to address its operational weaknesses and streamline operations. The firm is also refining its loyalty programs and improving employee training for a high-quality experience across all locations. Given its stellar performance, the stock is up over 123% in the past six months, promising more gains ahead.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
