Sample These Three Restaurant Chains

 | May 22, 2014 | 4:30 PM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

dri

,

bwld

,

pnra

,

cake

Depending on what is happening in the industry, restaurants go in and out of the news. Right now, the planned sale of Darden Restaurants' (DRI) Red Lobster chain to the private equity firm Golden Gate Capital for $2.1 billion has put the industry back in the public spotlight.

My guru investment strategies are also putting the spotlight on restaurants. Several restaurant companies earn top grades from these, which are computerized strategies I modeled from those used by some of Wall Street's most savvy investors.

It's unlikely that Darden makes any investor's mouth water, but Buffalo Wild Wings (BWLD) does. This franchisor operates more than 1,000 sports bars,  featuring, naturally, Buffalo-style chicken wings. The company earns a nod from my Martin Zweig-based strategy. The company has an attractive P/E ratio, which cannot be more than 43 (Buffalo Wild Wings' is 31.77) and its sales growth is increasing. In addition, earnings per share (EPS) for the current quarter are greater than the results from the same quarter a year ago, earnings have increased for each of the past five years and debt as a percent of equity is quite low (7.09%).

Panera Bread's (PNRA) focus on bakery products has helped the restaurant chain rise above others. In addition to bread, the company serves pasta, salads, sandwiches and soups. The company operates 1,800 bakery/cafes in the U.S.

Using my Peter Lynch strategy, I determined that I like this company's attractive 0.93 P/E/G ratio, which is price-to-earnings relative to growth. It is a measure of how much the investor is paying for growth. A P/E/G of up to 1.0 is acceptable. Another appealing variable is that the company holds absolutely no debt.

Another bakery-restaurant combination that the Lynch strategy has me sweet on is The Cheesecake Factory (CAKE). Known for its extensive menus (which include 200 items), the company operates 181 full-service restaurants. The Cheesecake Factory's P/E/G is 0.95 and its debt-to-equity is almost as desirable as Panera's 4.97%.

These three profitable restaurant chains are all well established with strong brand recognition and track records of success. They promise to be tasty investments in the coming years.

Columnist Conversations

CHECK IT OUT HERE Lot's of great out and underperformer picks, as well as M&A ideas that you don't always ...
The major market indices continue to move within the parameters of the Fibonacci retracement levels measured o...
Since we cleared a key decision on the way up, I want to watch this pullback for an entry if it fires off a bu...
Conclusion DDD is down today on new that the firm has cut revenue forecast due to production issues. The issue...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.