Buffalo Wild Wings (BWLD)

jpauling352 (< 20) Submitted: 6/04/07 11:04 PM : Start Price: $27.48 BWLD Score: 66.69

Like many other Hidden Gems subscribers, I have enjoyed the 100% increase in share price over the last 6 months. That is not a bad return at all. The company is great, management has everything under control, and the future looks promising. However, unlike most people who seem to keep buying more shares, I sold off a 1/3 of my position recently, here is why.

Taking all assets at book value, each share has almost $13 in assets supporting it. This is a great thing, but the earnings, as great as they may be, seem potentially overvalued. Currently, EPS for the last 4 QTRs is $1.68. Subracting out the $13 in assets from the share price, we need to justify $75 in earnings. $75/$1.68=44.6. The company is trading at a P/E of 44.6. That means that for the current value to be correct, the company needs to grow earnings at 45% to get a PEG of 1. Using the same calculation as above, the P/E ratios for the next 2 years are 32 and 26.

Now, analysts are often wrong, as you have seen BWLD beat the street the last 3 QTRs, but this is definitely an expensive stock. There is something to be said for good management, brand recognition, inside ownership, and the many other great aspects of this company. Also, the menu price increase means that comps should be very favorable for the next 3 quarters. Despite the negative tone of this write up, I still own several hundred shares, I still rate it as a buy on CAPS, and I still talk about it everyday like this company is God's gift to chicken wings, beer, sports, and that trivia game you can play at the bar. I just do not see another big run for the share price in the near future.

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