Friday's column explored several names in the restaurant sector, and now we'll dig a little deeper. This has indeed been a solid year for restaurant stocks so far. The forty one names in the sector with market caps above $100 million are up an average of 21% year to date, and thirty of those names are in positive territory. As a group, they are trouncing the S&P 500 (+11.1%), Russell 2000 (+12.5%) and Russell Microcap Index (+9.8%).
On Friday, we held out Noodles & Co (NDLS) (+138%) as the best performer year to date, but there are a whole host of others that have also put up great performances.
BJ's Restaurants (BJRI) (+92%), has been quietly blowing away consensus estimates this year, after a less-than-stellar 2017. BJRI is currently trading at 29x next year's consensus estimates. That seems on the expensive side to me at this point, but the company has been hitting on all cylinders and we are in an economy where consumers are more inclined to do dine out, which also bolsters the sector.
Wingstop (WING) (+79%) has also been on fire. The stock, which went public in 2015, is trading near all-time highs and also been fueled by several better-than-expected quarterly earnings results. I also wonder whether part of the allure for investors is that following Buffalo Wild Wings' acquisition early last year by Roark Capital, WING is really the only publicly traded pure-play on chicken wings, an area where demand (and prices) have exploded over the past couple of decades. Talk about expensive, WING trades for 68x next year's consensus estimates.
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Lesser-known California-based casual dining name The Habit Restaurants (HABT) -- which has 258 locations, 184 of which are in CA -- has quietly risen 67% this year. Specializing in burgers, the company went public in November of 2014 at $18 a share, and was trading in the low $40s less than a month later.
It was all downhill from there, as the IPO allure faded (as it often does, especially in restaurants), and shares opened 2018 at less than $10. The stock did not really pop until the summer, when the company announced better-than-expected second-quarter earnings and increased guidance for the year. HABT is expected to be just modestly profitable this year and next.
Still, it is one that I will be keeping an eye on. The company, which was founded in 1969, has pushed out of California, with locations in Arizona, Utah, New Jersey, Florida, Nevada, Idaho, Maryland, Virginia, Washington, the United Arab Emirates and China. There is even one location in Pennsylvania, close enough to home that I'll be checking it out; just what we need, another burger chain.
On Wednesday, I'll be reviewing some of the names that have not fared so well in 2018.