Buffalo Wild Wings (BWLD) May Be on Similar Trajectory as Chiptole (CMG)...But Cheaper!
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Buffalo Wild Wings (Nasdaq: BWLD) is catching a few bids Monday, following a bullish report from the WSJ.
Pegging Buffalo Wild Wings as a play for investors that missed out on Chipotle's (NYSE: CMG) rapid growth, the WSJ says Buffalo Wild Wings is on the same path, with more value per share.
The big gripe on Wall Street is that Chipotle's stock got too expensive, currently trading for about 39 times next years earnings consensus. Comparably, Buffalo Wild Wings is only going for about 19 times estimates. Earnings for Buffalo Wild Wings are expected to grow 22 percent in fiscal 2012, compared with 26 percent of growth for Chiptole. EBITDA on Buffalo Wild Wings is 16 percent of revs, lower than 19 percent at Chipotle.
One concern investors might want to take into consideration is store growth. With a smaller overall store size, Chipotle is expected to increase its count from 1,200 currently to over 4,000 in a few years. Buffalo Wild Wings, for its part, has bigger, more-complex locations to wrestle with, including the need for liquor and alcohol licenses. Deutsche Bank thinks that Buffalo Wild Wings could grow from 800 locations right now, to 1,500 in the U.S. and Canada by growing on average of 100 locations per year.
Buffalo Wild Wings's only immediate competition is Hooters of America, a privately-held company that hasn't shown much in the way of growth over the last several years, and currently only has 450 locations. Otherwise, most competition is from private establishments splattered around the U.S.
Easing the effect of rising input costs, like chicken and fuel prices, will be a priority for Buffalo Wild Wings. The WSJ notes that bone-in chicken wings account for about 20 percent of sales, and those can't be hedged. Notably, in 2009 when bone-in prices surged, Buffalo Wild Wings still reported a 24 percent increase in earnings for the period.
But with the slower growth profile, no immediate competition visible, and barring no significant chicken price fluctuations, Buffalo Wild Wings shares could grow their own set of wings.
The stock is up about 5 percent Monday.
Pegging Buffalo Wild Wings as a play for investors that missed out on Chipotle's (NYSE: CMG) rapid growth, the WSJ says Buffalo Wild Wings is on the same path, with more value per share.
The big gripe on Wall Street is that Chipotle's stock got too expensive, currently trading for about 39 times next years earnings consensus. Comparably, Buffalo Wild Wings is only going for about 19 times estimates. Earnings for Buffalo Wild Wings are expected to grow 22 percent in fiscal 2012, compared with 26 percent of growth for Chiptole. EBITDA on Buffalo Wild Wings is 16 percent of revs, lower than 19 percent at Chipotle.
One concern investors might want to take into consideration is store growth. With a smaller overall store size, Chipotle is expected to increase its count from 1,200 currently to over 4,000 in a few years. Buffalo Wild Wings, for its part, has bigger, more-complex locations to wrestle with, including the need for liquor and alcohol licenses. Deutsche Bank thinks that Buffalo Wild Wings could grow from 800 locations right now, to 1,500 in the U.S. and Canada by growing on average of 100 locations per year.
Buffalo Wild Wings's only immediate competition is Hooters of America, a privately-held company that hasn't shown much in the way of growth over the last several years, and currently only has 450 locations. Otherwise, most competition is from private establishments splattered around the U.S.
Easing the effect of rising input costs, like chicken and fuel prices, will be a priority for Buffalo Wild Wings. The WSJ notes that bone-in chicken wings account for about 20 percent of sales, and those can't be hedged. Notably, in 2009 when bone-in prices surged, Buffalo Wild Wings still reported a 24 percent increase in earnings for the period.
But with the slower growth profile, no immediate competition visible, and barring no significant chicken price fluctuations, Buffalo Wild Wings shares could grow their own set of wings.
The stock is up about 5 percent Monday.
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