Published:
June 12,
2007
Buffalo Wild Wings (Nasdaq: BWLD,
$41.44) --
Buffalo Wild Wings is not exactly a newcomer to the fast-casual
dining space. However, it is a relatively new treat for
investors, having just gone public a few years ago. Since that
time, the firm's annual revenues have doubled, while its profits
have surged eight-fold -- rising from around $2 million to more
than $16 million.
Earlier this month, the company posted sizzling first-quarter
results, picking up right where it left off last year. For the
period, revenues jumped +24%, driven by an impressive +9% gain
in company-owned same-store sales -- tops in the industry.
Meanwhile, earnings soared +58% to $0.63 per share, blowing away
Wall Street estimates.
To be sure, this is a crowded industry, but Buffalo Wild Wings
has built up a loyal following around the country -- having
earned numerous "Best Sports Bar" awards. Whether it's stopping
in for a quick bite to eat or settling in with a platter of
chicken wings for the big game, patrons are usually lined up for
a table -- and the average Buffalo Wild Wings location rakes in
more than $40,000 in weekly sales.
After soaring +95% over the past year, shares of BWLD are not
exactly cheap, trading at roughly 20 times trailing cash flows.
However, we aren't nearly as concerned with last year's cash
flows as those the company is likely to generate over the next
five to ten years.
Unlike many growing companies, Buffalo Wild Wings is already
churning out enough cash to fund its expansion internally, so it
won't have to take on too much debt. And with less than 500
restaurants in the chain, there is ample room to grow. In fact,
management is targeting +15% unit growth going forward -- a big
reason why revenues are forecast to climb +20% annually over the
next several years and why earnings are projected to rise even
faster.
Plus, management has a history of delivering results that
outpace expectations. However, we should point out that this
sometimes sets up a company to be a victim of its own success --
when earnings merely meet estimates (rather than beat them) some
investors might decide to dump their shares, thinking the growth
party is over.
Nevertheless, for aggressive investors willing to stomach some
short-term volatility in exchange for excellent long-term growth
potential, BWLD is worth considering. At the moment, the shares
are only trading at a mild discount to our fair value.
Good investing!
Nathan Slaughter
Editor
Half-Priced
Stocks
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AXA/Equitable Advisors, where he provided comprehensive investment advisory
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Several years ago Nathan switched gears and decided to devote
his time exclusively to financial analysis and writing. He has since published
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Nathan's educational background includes NASD series 6, 7, 63,
& 65 certifications, as well as a degree in Finance/Investment Management.
He currently resides in Shreveport, LA with wife Julie and sons Aidan and Riley.
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