The other part that makes Panera Bread comfortable for customers is the diversity in their offerings. While most people think of Starbucks and Dunkin for coffee, McDonald’s for fast food, and Chipotle for burritos, Panera has fans of many of their menu items. When you can go to one restaurant, get your food quickly, everyone can have something different, and the price is right, a restaurant is going to be popular. When you add in the fact that Panera keeps coming up with new menu items, you have a company that can grow both externally and through their menu.
Comfortable This…It’s Growth That Matters
It’s all well and good for diners to be comfortable with a restaurant, but unless the company is growing many investors won’t care. The good news for investors is, Panera is reporting excellent growth, and 2013 looks like another banner year.
Panera’s recent earnings were impressive on all fronts, a 15% increase in revenue, and a 23% increase in EPS were just the headline numbers. The company also saw system-wide comps up 4.9%, and the company’s weekly sales have increased each year for the last four consecutive years.
What really sets Panera apart is their projections for 2013. While investors aren’t surprised when companies like McDonald’s and Dunkin Brands suggest low single-digit comp. growth for the year, this was a shocking revelation from Chipotle. In fact, Chipotle said they expected, “flat to low single-digit comps for 2013”. Panera on the other hand said they expect, “between 4.5% and 5.5% comparable same-store sales”. Of the restaurants we have looked at, only Starbucks matched this view suggesting “mid-single digit comp. sales growth”.
It’s really no surprise then that Panera also sees strong EPS growth for the year. The company expects 17% to 19% EPS growth for the full year, which compares favorably to McDonald’s at about 8%, Dunkin Brands at 15.6% to 17.9%, and even Starbucks at 15% to 20%. Chipotle is expected to report 17% EPS growth, and even that might be a stretch based on slowing comparable store sales.
On a valuation basis, it’s hard to bet against Panera Bread over their competition. Using the PEG ratio, you can see how favorably Panera compares to its peers:
| Name | P/E on 2013 Est. | EPS Growth | PEG |
| Chipotle | 31.26 | 20.22% | 1.55 |
| Dunkin Brands | 24.36 | 15.43% | 1.58 |
| McDonald’s | 16.39 | 8.71% | 1.88 |
| Panera Bread | 23.11 | 19.08% | 1.21 |
| Starbucks | 26.1 | 18.57% | 1.41 |
As you can see, Panera Bread is relatively cheaper than its competition across the board. Considering Chipotle’s growth numbers actually look worse than Panera, how do you argue that Chipotle is a better value at this point? The answer to that question is, you don’t. Panera has been the more consistent performer, and their broader menu insulates them from input cost pressures. The company is off to a great start for this year, and with a stock relatively cheaper than any of its peers, PNRA should be at the top of any growth investors’ Watchlist.
The article We Have A New Leader originally appeared on Fool.com and is written by Chad Henage.
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