The financial front shows reasonable – if unspectacular – results. Earnings-per-share declined from $0.74 in 2012 to $0.69 in 2013. Gradual increases in revenue over the past four years were balanced by steady decreases in operating margin over the same time period. Same-store sales were down 0.6% for the first quarter of 2013 compared to the first quarter of 2012.
The company also pays a 3.5% dividend. Given a payout ratio of 72%on the dividend, it may not be sustainable. Additionally, the company is carrying a lot of debt: the debt-to-equity ratio is 4.2, according to Morningstar. This will hamper future growth and explains why the company is focusing on franchise expansion – franchises don’t require the sort of capital investment that new company stores do. That debt is a big red flag, but the company is making the right moves to avoid growing its debt load. On balance, Einstein seems to be a good investment for the longer-term (and if the dividend survives, it will be a good income stock as well.)
Panera
Panera Bread Co (NASDAQ:PNRA) is quickly growing profits, with earnings-per-share jumping from $4.55 in 2011 to $5.89 in 2012 and revenue climbing from $1.8 billion in 2011 to $2.1 billion in 2012. Earnings-per-share for the first quarter of 2013 was $1.64, a significant increase from the earnings-per-share of $1.40 in the first quarter of 2012. Panera saw a 3.3% increase in same-store sales between the first quarter of 2012 and the first quarter of 2013.
Panera Bread Co (NASDAQ:PNRA) opened 10 new company bakeries and 12 new franchise locations in the first quarter of 2013 alone; at that rate, Panera will open about twice as many company and franchise restaurants in 2013 as Einstein Noah Restaurant Group, Inc. (NASDAQ:BAGL). Panera has a great balance sheet, with $323 million in cash and no debt. Even so, it trades at a reasonable price-to-earnings ratio of 30.2 based on earnings from the trailing twelve months and a forward price-to-earnings ratio of 22.6, according to Morningstar. This company combines some very attractive investment traits including dominance in its market, superb expansion, and same-store sales growth.
Final thoughts
Cosi Inc (NASDAQ:COSI) has a compelling underdog story that may pay off very handsomely for its investors, but its financials are all trending in the wrong direction. Wait to invest until management’s programs have more time to show results. Einstein is a solid investment – it will be hampered by its debt load in the coming years, but it still has growth ahead.
Panera Bread Co (NASDAQ:PNRA), however, is the obvious choice – it trades at a significantly higher price-to-earnings ratio than Einstein (30.2 for the trailing twelve months, compared to 20.7 for Einstein) because despite having by far the largest footprint of these three, it is the company that is most acting like a growth stock. Management is focused on growing the business quickly and profitably, and not just by opening new bakeries. Same-store sales growth is also impressive at Panera, surpassed only by the Pollo Tropical concept run by Fiesta Restaurant Group which recorded same-store sales increases of 3.8 percent. Buy Panera now; consider Einstein for the income and moderate growth, and wait on Cosi Inc (NASDAQ:COSI).
Michael Douglass has no position in any stocks mentioned. The Motley Fool recommends Panera Bread. The Motley Fool owns shares of Panera Bread.
The article Three Fast-Casual Sandwich Companies, One Winning Investment originally appeared on Fool.com.
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