Panera Bread Co (PNRA), Chipotle Mexican Grill, Inc. (CMG): Tapping the Investment Opportunity in Fast Casual Restaurants

Which company offers an attractive entry point?

Both Chipotle Mexican Grill, Inc. (NYSE:CMG) and Panera Bread are growing at a good pace but Panera Bread’s valuations offer a much better investment opportunity. Buffalo Wild Wings (NASDAQ:BWLD) is also cheap but its growth prospects are not as promising as Panera Bread’s. Buffalo Wild Wings missed earnings estimates last quarter by $0.12 resulting in a 5% dip in the stock. Since major sporting events are the key drivers for the company to bring in customers, earnings are volatile, which may not please many investors.

Both Panera Bread and Chipotle Mexican Grill, Inc. (NYSE:CMG) boast healthy operating margins, whereas Buffalo Wild Wings doesn’t impress much. In fact, Buffalo Wild Wings (NASDAQ:BWLD)’s operating margin has taken a huge hit, slumping from 12% last year to 8% this year — a 50% decrease — mainly due to rising chicken prices which are up over 40%. The company intends to tackle this issue by selling chicken wings per pound instead of per piece. It remains to be seen if the company is able to stabilize its business by catering to a wider customer base through additions in its menu, and also if it is successful in controlling costs; until then investors are better off without this stock.

Foolish takeaway

All three companies are strong brands in the fast casual restaurant industry, but Panera Bread Co (NASDAQ:PNRA) offers the best investment opportunity. Its growth prospects are similar to Chipotle but it has cheaper valuations. On the other hand, it has a more stable business model than Buffalo Wild Wings. Panera Bread’s new menu offerings may add to the top line very fast, and the stock price may follow the trend and reward Foolish investors.

harsha lohia has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings, Chipotle Mexican Grill, and Panera Bread. The Motley Fool owns shares of Buffalo Wild Wings, Chipotle Mexican Grill, Inc. (NYSE:CMG), and Panera Bread. harsha is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Tapping the Investment Opportunity in Fast Casual Restaurants originally appeared on Fool.com and is written by harsha lohia.

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