Hungry for Profits?
Piyush is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
European turmoil has had its toll on the shares of most global companies, purely because of macroeconomic concerns. At this point, most investors are prefer to stay away from companies that have a presence in the troubled countries of Europe, no matter how great the growth potential may be. Also talking about safe investments, a business model that caters to the daily nutritional needs of millions is expected to have a stable and steady increase in its demand. This is exactly why Panera Bread (NASDAQ: PNRA) pops up on my radar, and here are a few reasons why it should be on your radar as well.
Panera Bread is a chain of bakery cafes and restaurants, with its presence in the US and Canada. The restaurant chain is focused on providing their customers, premium quality dishes. As of June, 2012, the company had 1591 cafés spread across 41 states in US and Canada. The company believes in forging relationships with its customers that is suggested by the 11 million members in its loyalty program.
What’s amazing here is that during the housing crisis years, when most stocks in the market were taking a plunge, Panera Bread seemed to be defying recession. The stock provided positive returns of 26% in 2009 with both topline and earnings surging ahead, and almost mocking at other industries for their negative growth.
Beating the Peers
Taking a look at the 5 year performance chart of Panera Bread along with its global peers McDonalds (NYSE: MCD) and Yum Brands (NYSE: YUM) , we can see that the stock has not been able to grow in the crisis years, but has also consistently outperformed its peers.
Also taking at the revenue growth of the three competitors over the past 5 years, we can see that Panera takes the win by a huge margin.
The company recently reported better than expected quarterly financial results, with an EPS of $1.50 against the expected $1.39. The earnings grew 21% compared to the year ago quarter. The topline of the company owned cafés increased by 7.1% and the net profit margin increased by 0.9%. The total revenue surged 18% to $530.6 million compared to last year’s quarter, beating the market’s estimates of $518 million. The numbers look great and to top it all, the company announced a share buyback program of $600 million, which is to be carried out over the next three years, and this could mean further upside in the stock’s price.
Shares of Panera Bread trade at 24.95 times the trailing P/E and 1.79 times PEG. The stock isn’t undervalued, but isn’t overvalued as well. The stock is trading at the top end of fairly priced range, which to an extent justifies the growth prospects of the company. Analysts expect the EPS growth in the next year to be around 18.65%, and an EPS growth of around 18.45% over the next 5 years, meaning a potentially continued ride for the investors of the company.
The Foolish takeaway
The company was able to perform brilliantly during the crisis years, and has been beating its peers consistently in terms of returns on the stocks and revenue growth. The financial results were better than expected and analysts expect the fireworks to continue over the next 5 years. It is because of these reasons that we have a Foolish buy rating on the stock.
PiyushArora has no positions in the stocks mentioned above. The Motley Fool owns shares of McDonald's and Panera Bread. Motley Fool newsletter services recommend McDonald's and Panera Bread. 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.If you have questions about this post or the Fool’s blog network, click here for information.