Restaurant Growth Stocks
I am a big fan of smaller successful restaurant chains. If you buy into the right ones you can make 15% to 20% gains year after year. I have been looking to buy into this sector recently so I did some research. I am a follower of Peter Lynch who believed that an earnings growth rate should equal p/e ratio so here is what I came up with in analyzing the smaller restaurant chains. Buffalo Wild Wings is growing earnings at 18% and has a p/e ratio of 28. You also have the prospect of an NFL lockout that could send this stock much lower. Texas Roadhouse has a p/e ratio of 20 and a growth rate of 13%. Texas Roadhouse announced that they are going to be significantly growing the number of their restaurants now that the economy has recovered. Chipotle Mexican Grill has a p/e ratio of 44.5 and grew earnings at 23% last quarter. BJ's Restaurant has a p/e ratio of 50 and and grew earnings 65% last quarter. The Cheesecake Factory has a p/e ratio of 21.5 and earnings growth of 10%. PF Chang's China Bistro missed earnings estimates pretty bad today but it grew earnings 21% and has a p/e ratio of 20.
I would love to get into all of these stocks if their stock prices become more reasonable. I bought PF Chang's today because it looked like a really good bargain to me. BJ's Restaurant looks like a bargain too but a p/e ratio of 50 is pretty risky with food inflation hurting margins across the industry. If there are any other successful restaurant chains I neglected to mention let me know.