Is Panera Bread Co (PNRA) a Buy After a Sell-Off?

Undervalued or not?
Though the results definitely echo the challenges that many restaurant operators are facing today, were Panera Bread (NASDAQ:PNRA)’s results bad enough to merit a 10% sell-off?

Let’s add some perspective by comparing Panera Bread to fast-casual peer Chipotle Mexican Grill, Inc. (NYSE:CMG).

Source: Yahoo! Finance.

Yes, Chipotle Mexican Grill, Inc. (NYSE:CMG) is growing more rapidly than Panera Bread. Its revenue was up 18.2% from the year-ago quarter in Chipotle’s most recent quarterly results. Comps for Chipotle look a bit tastier, too: up 4.5% (after adjustments for a quarter with one fewer day than the year-ago quarter).

But Chipotle’s growth story comes at a significant price to investors. Measured by price-to-sales, price-to-earnings, and price-to-operating cash flow, Chipotle is significantly more expensive than Panera Bread.

Even if Chipotle’s laser-focused business model makes the burrito maker more competitive than Panera Bread in a tougher operating environment, Panera Bread’s reasonable price (now even more reasonable thanks to a sell-off) makes the baker seem like the safer bet for investors bullish on fast-casual concepts.

However, even after the sell-off, fast-casual is still a costly business to get into. I’m not quite ready to fork out the premium required to buy Panera Bread shares at this point, but I could be underestimating fast-casual and health-food trends in general.

The article Is Panera Bread a Buy After a Sell-Off? originally appeared on Fool.com and is written by Daniel Sparks.

Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread.

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