Cash inflow has, however, been on the decline. During 2013’s first quarter, Buffalo Wild Wings performed below conservative estimates. However, I should highlight the fact that earnings remained positive. The evidence points to the the firm having reached its roof; at least, for the time being. Although a forward P/E of 26x is considerably lower that trailing P/E of 32x, it’s still high.
So, the stock is relatively expensive and return on investment is not at its highest. Buffalo Wild Wings (NASDAQ:BWLD) is not a bad investment, but investors are recommended to hold until the next train arrives.
Don’t forget son, there is someone up above
Few brands and tastes are so widely recognized as McDonald’s Corporation (NYSE:MCD). Expansion and innovation are two characteristics shared with the other two companies. Same can be said about McDonald’s franchise strategy and menu improvements, which helped maintain strong financials over the years. So, what differentiates it from the bunch? Its size.
During the last economic crisis, much was said about too-big-to-fail banking institutions. McDonald´s is sewed from the same thread, in a different cloth. But, the company has not been greedy, avoiding risky investments and paying investors steady dividends. Also, debt is controlled by continuous share repurchase, leaving evidence of steady cash inflow.
Another size related advantage is its leading market penetration. While Domino’s Pizza, Inc. (NYSE:DPZ) is attempting to enter the Japanese market, Ronald has already landed in China. Although the balance sheet in the country is not as favorable as, let’s say Germany — one of the most successful abroad ventures — having entered is already a very important achievement.
Also, market penetration has an entrance cost and that explains McDonald’s Corporation (NYSE:MCD) sluggish growth in China. Government regulation, personnel training, and logistics are just some of the obstacles it will have to wrestle with in order to establish itself in China, and balance its finances.
So, besides its size and dominant market position, McDonald´s does not have much to say. Dividends will surely be paid in the long-term, but in the short-term, prospects are not that good. In line with most analysts, it is recommended to hold until the company proves to have learned from managerial mistakes committed during 2012, and new products pass customers’ taste test.
Bottom line
Investors have to look after one’s own gold, and where it is deposited. Macroeconomic pressures are not ignored, but rather set aside of my analysis, since they pose the same threat to all three companies. The importance of macroeconomic performance here relates to how much pressure is put onto the economic system as a whole. An important question is whether the pressure will break a country’s back, or if that pressure will significantly reduce disposable income.
If the country’s back is broken, meaning the pressure reached its maximum, no one will visit a restaurant. So far, the world has survived without Buffalo Wild Wings, while McDonald’s Corporation (NYSE:MCD) has yet reached the lower classes outside the developed world. Meanwhile, Domino´s is the most recommendable stock to buy because it possesses the widest customer base and a fair valuation, and returns on geographical expansion are soon to come.
Damian Illia has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings and McDonald’s. The Motley Fool owns shares of Buffalo Wild Wings and McDonald’s. Damian is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 3 Fast Food Choices to Satisfy All Tastes originally appeared on Fool.com and is written by Damian Illia.
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