Use access key #2 to skip to page content.

Panera Bread - Value Alert

Recs

4

September 24, 2013 – Comments (7) | RELATED TICKERS: PNRA

Texas (September 24, 2013) Wax Ink has issued a Negative Investment Interest opinion for Panera Bread (Nasdaq: PNRA) based on a recent baseline equity review which placed fair value between $71-$84.

Negative Investment Interest means that continued investment research is not warranted at this time.

The recent close of $168.80 is approximately 298% above the fair value buy target for the stock and approximately 93% above the fair value close target for the stock. The recent close is also 11% below analysts’ twelve-month $190.00 median price target for the stock.

The recent close represents a 1% decrease in the one year price of the stock, while year-over-year sales increased 17%, year-over-year earnings increased 24%, and year-over-year debt increased 0%.

The stock currently has a trailing twelve-month PE Ratio of 18, and a PEG Ratio of 1.2 basis estimated forward earnings growth of 15.5%.

In the past 52 weeks, share prices have moved between a high of $194.77 and a low of $153.65, placing equilibrium at $172.10.

With the recent close, the stock is trading 15% below the 52 week high, 9% above the 52 week low, and 2% below equilibrium.

The three-month average daily trading volume for the stock is approximately 524,000 shares.

Panera Bread together with its subsidiaries, owns, operates, and franchises retail bakery-cafes in the United States and Canada.

The company's listed competitors include Chipotle Mexican Grill, Einstein Noah Restaurant Group,and Starbucks Corporation.

Financial information that may be contained herein, is based on the company's most recent annual SEC filing for year ending December 25, 2012.

All prices are per share unless otherwise noted.

Wax Ink currently has no investment position in any company mentioned in this alert.

For use by Accredited Investors as defined under Title 17, CFR §230.500, Regulation D.

Copyright © 2013 Wax Ink

Wax Ink is a baseline equity research company not licensed or registered with any government agency

7 Comments – Post Your Own

#1) On September 24, 2013 at 11:09 AM, ElCid16 (97.10) wrote:

I'm not going to say if you're right or wrong with your analysis - I don't know what the fair value of PNRA is.  But I would like to offer some perspective on your "fair value" estimate:

$75-80 per share (the Wax fair value estimate) would put the market cap around $2.5B.

2013 Net Income is going to be at least $200M (but will likely be closer to $205-215M).  So based on your fair value estimate, you're looking for a P/E of around 12.

Large Cap companies like GIS, K, PG, JNJ, MCD, and KO, with single digit growth rates, don't even trade at P/E ratios of 12.

The 5-year EPS growth, and the expected EPS growth of PNRA is around 25%.

Ben Graham suggested (in Table 11-4 of The Intelligent Investor) that a P/E ratio of 12 corresponds to an expected long-term earings growth rate of about 2%.

Panera's expected long-term earnings growth rate isn't 2%. 

 

Report this comment
#2) On September 25, 2013 at 5:52 AM, wax (96.75) wrote:

ElCid;

Thanx for your perspective. Please realize that I am not Ben Graham or Warren Buffett, I am simply an individual investor sharing his preliminary research.

The idea is that I have provided anyone that wants to use it, a means to begin their own research.

The rest of your comments concern growth. The problem to me with that is it is growth that may or may not be achieved. Yet the markets are factoring in all of that growth.

For those of us that were slapped pretty good when the tech bubble burst in early 2000, we know what can happen when growth is the driving factor behind investing, which is the reason once a PE gets above 15 I don't have much interested in it.

Unless I already own it. :-)

Wax

Report this comment
#3) On September 25, 2013 at 12:39 PM, ElCid16 (97.10) wrote:

For those of us that were slapped pretty good when the tech bubble burst in early 2000, we know what can happen when growth is the driving factor behind investing

Yes, yes.  But most people who were "slapped" by the tech bubble weren't investing in restaurant stocks trading at P/E ratios of 25.  They were investing in tech companies at P/E ratios of 60+.  Trying to predict the growth rates of tech stocks and trying to predict the growth rates of a restaurant chain are slightly different, no?  

Here is Panera's annual store count, starting in 2009: 1325, 1380, 1453, 1541, 1652.  

Here are Panera's comparable restaurant sales increases over those years, too: 3.8%, 2.4%, 7.5%, 4.9%, 6.5%.

Is Panera going to continue growing earnings at 25% per year?  I don't know, but I seriously doubt it.  Is Panera going to at least grow 5-10% per year?  I'd say that's a pretty good bet...

To "breakeven" Ben Graham (and I'm not Ben Graham either, by the way) suggests that an investor at a P/E of 25 needs to see 9% annual earnings growth.  Panera investors at these levels are simply betting on seeing at least 9% earnings growth.  And...I happen to be one of them.  :)

Thanks for the discussion, Wax. 

Report this comment
#4) On September 26, 2013 at 5:53 AM, wax (96.75) wrote:

ElCid;

"Yes, yes.  But most people who were "slapped" by the tech bubble weren't investing in restaurant stocks trading at P/E ratios of 25.  They were investing in tech companies at P/E ratios of 60+.  Trying to predict the growth rates of tech stocks and trying to predict the growth rates of a restaurant chain are slightly different, no?"

Yes we were.

Now go back and re-read your paragraph and then ask yourself this question. What decision would I have made 15 years ago? Remember, you didn't have the information 15 years agao that you have today.

There is nothing wrong with paying for growth. As the matter of fact, my value estimate for the stock is between $71-$84 and that includes TRAILING 12 months earnings growth of 24%.

What I have no intention of paying for AGAIN, as many of us did 15 years ago, is PROJECTED or estimated growth. Paying for future growth burned many people back then and I for one, am not interested in what MIGHT happen, I prefer to invested based on what DID happen.

Wax

 

 

 

Report this comment
#5) On September 26, 2013 at 2:50 PM, ElCid16 (97.10) wrote:

What I have no intention of paying for AGAIN, as many of us did 15 years ago, is PROJECTED or estimated growth.

once a PE gets above 15 I don't have much interested in it.

Then why do you analyze growth companies (companies trading over a P/E of 15, by your definition), at all?  You know every analysis is simply going to end with you saying that the company is overvalued by X00%... 

Report this comment
#6) On September 27, 2013 at 5:39 AM, wax (96.75) wrote:

ElCid;

I am a value investor. When I analyze a company, I have no idea what my baseline is going to return. That somebody somewhere calls a company a "growth" company means nothing to me at all.

What does matter is that I have some reasonable idea what the value of the company is.

I valued a company this morning that closed yesterday at $18.65. Analysts currently have estimated forward earnings growth of 12.5%.

Here is some of what I found...

The recent close represents an 60% increase in the one year price of the stock, while year-over-year sales decreased 1%, year-over-year earnings decreased 27%, and year-over-year debt increased 9%.

My value estimate for the company is $16 to $19 and the company has a trailing PE of 10.

Is this what you call a growth company? Why would anyone consider buying such a company at current price levels?

Wax

Report this comment
#7) On September 27, 2013 at 9:38 AM, drgroup (69.00) wrote:

Buying into this company now is like buying into gold when it was $1800/oz. I just can't see buying a lunch sandwich for $13.00+/-. Novelty will soon ware off...

Report this comment

Featured Broker Partners


Advertisement