Chipotle Mexican Grill, Inc. (CMG), Noodles & Co (NDLS): Are QSRs the New Tech?

Not alone
Chipotle and Noodles & Co (NASDAQ:NDLS) are just two examples of the QSR craze. Panera Bread Co (NASDAQ:PNRA) trades at 23 times forward earnings. While not as unreasonably priced as the other two, it’s still got a hefty price tag for a company that has already gone through its biggest growth phase.

To put it in perspective, a growing tech firm like Blucora Inc (NASDAQ:BCOR) trades at under 20 times forward expected earnings. Blucora Inc (NASDAQ:BCOR) operates TaxAct, a leading Web-based tax preparer service that is expected to continue its market-share gains. The company also owns InfoSpace, a search and online monetization business. Sure, it has Google Inc (NASDAQ:GOOG) to compete with, but Blucora has still managed to grow at a CAGR of 18% since 2009.

Ten years ago, it would be hard to imagine an Internet company trading at a strong relative discount to a burrito shop.

Bottom line
Chipotle and Panera Bread Co (NASDAQ:PNRA) are proven companies with strong management. I have no doubt they will continue to be successful in the coming years. But paying the premiums the market demands today is a stacked bet. The same goes with Noodles, though we know less of management’s shareholder-friendliness.

I’m not predicting widespread multiple correction for these companies, because the market can remain irrational for an infinite amount of time, but an investor concerned with the value received for the price paid shouldn’t be too eager to jump on these trains. Perhaps even more interesting is that tech may be a new darling for value-oriented investors. Let that marinate for a while.

The article Are QSRs the New Tech? originally appeared on Fool.com.

Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Chipotle Mexican Grill, Google, and Panera Bread.

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