Family-Style Dining, Beer on the Side
Ash is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
If you have yet to eat lunch, I’d definitely recommend you do so. This article will leave you feeling hungry for food and hungry for investment. We’re going to be taking a look at three beloved restaurant chains that layer the contiguous United States.
On deck, we have one of my favorite places to go and relax, Buffalo Wild Wings (NASDAQ: BWLD). We’ll follow up the chicken wings with some family style Italian food provided by Darden Restaurants (NYSE: DRI), and then to complete the feast we’ll grab an ice-cold beer from BJ’s Restaurants (NASDAQ: BJRI).
Wings, Beer, Sports.
Buffalo Wild Wings has long been a favorite restaurant of mine. For those that haven’t been, you’re missing out. The places are dimly lit, and full of flat screen TVs to catch the latest in sports. They also serve a great selection of food and alcoholic beverages. It’s no wonder that this company has been on the growth path it has over the last few years.
Buffalo Wild Wings has managed to grow its stock price by over 275% over the last five years. What could have been bought in 2008 for around $25 per share is now setting you back close to $100. This isn’t just speculative buying either. Sales in 2008 were $422 million, and they’ve grown to over a billion dollars per year.
Currently this stock can be yours for 31 times earnings. That’s well above the industry average P/E of 24. Throw in the analyst’s expected 2013 growth of 18%, though, and you’re looking at a much better forward P/E.
The growth in 2014 isn’t expected to slow down either. Analysts have it pegged at 20%. With this kind of expected growth, I think you’d be silly not to buy in at these levels.
A More Diversified Play
Darden Restaurants is no doubt a more diversified restaurant play than that of Buffalo Wild Wings. Darden is the parent of brands such as Olive Garden, Red Lobster, and Longhorn Steakhouse.
For those of you that like a dividend, and a more fairly priced restaurant, you’re going to find it here. Darden pays a dividend that yields 3.9%, and this dividend has been growing by an exceptional 22% over the last five years.
Sales and net income have also been on the up at Darden over the five-year time period. Revenues have grown by 4.6% per year, and net income is topping out at 9% growth.
Unfortunately, analysts are a bit more skeptical on this company going forward than they are on Buffalo Wild Wings. The company has a firm ‘hold’ rating, and EPS is expected to be down by some 20% this year before recovering only slightly next year.
Darden does offer investors the ability to be in the restaurant space while continuing to collect a dividend. The dividend is a big plus when it comes to this company. The diversification is the second big merit that they have. Barring any sort of company-wide scandal, it would be very unlikely that all restaurants would lose out in public favor.
Flushing it all down
After you’ve finished the food you may wish to stop by the bar of a local BJ’s restaurant. BJ's Restaurant & Brewery, the company’s flagship restaurant, actually offers customers a selection of in-house craft beers while they indulge in one of the company’s hand tossed pizzas.
While they’re only open for business in fifteen states, they are growing. A good way to gauge that growth is to look at revenues. BJ’s has seen revenue growth averaging 17.8% per year over the last five years. You’d be hard pressed to find many companies doing that.
Analysts also expect that the growth will continue by a rate of 14% per year averaged over the following two years. That is some great growth from a chain I’m willing to bet some out there have never had the pleasure of dining at.
Buffalo Wild Wings and BJ’s Restaurants are the fastest growing companies here. Both of these companies are they types that I’m sure would fit in a growth investor's portfolio.
Darden appeals to a completely different crowd of investors, those that look for dividends. Darden provides an incredibly solid yield for a restaurant, and I feel that the company would be a great investment over the long term for any buy and hold investors out there.
Ash Anderson has no position in any stocks mentioned. The Motley Fool recommends BJ's Restaurants and Buffalo Wild Wings. The Motley Fool owns shares of BJ's Restaurants, Buffalo Wild Wings, and Darden Restaurants. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!