buffalonate (96.91)

Restaurant Growth Stocks

April 27, 2011 – Comments (2) | RELATED TICKERS: BWLD , CMG , PFCB

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.