The plain fact is that not everyone can be McDonald's (NYSE: MCD ) , or Microsoft (Nasdaq: MSFT ) , or Intel (Nasdaq: INTC ) , or any other company that virtually dominates an industry. Yes, the fast-food industry also lets you "have it your way" at Burger King, but there is still a glut of McDonald's on the brain.
The throwback of the fast-food chains is Sonic (Nasdaq: SONC ) , with its chain of drive-in restaurants. This old-school eatery makes you want to bring the entire cast of the movie American Graffiti back for a reunion. Even Ron Howard, alias Opie Taylor and Richie Cunningham, could appreciate Sonic's drive-in concept. The company has leveraged this concept since 1953 and has placed itself in a virtual time capsule, which has translated into a successful niche.
More good news for Sonic and its faithful investors: The company reported third-quarter earnings that were up 18% (year over year) and in line with expectations. The company's revenues fried the consensus estimate ($145.9 million vs. $141.5 million). Sonic also disclosed that this positive sales trend has continued in the first few weeks of June; the company's same-store sales growth has widely beat its target expectations of 2% to 4%. Going forward, the company also expects its total sales to grow in the range of 11% to 13% and its earnings expansion to approach 20%. That healthy double-digit growth translates into a lot of burgers and shakes being skated out to cars.
I agree with fellow Fool Rick Munarriz's comments in Sonic's Boom -- for a company supposedly serving burgers and fries in the shadow of McDonald's, Sonic is really holding its own. Fellow niche player Checkers (Nasdaq: CHKR ) competes with Sonic along the low-price-point line, but it has more of a drive-through concept than Sonic's drive-in configuration. (I remember going to Checkers a few times when I lived in suburban New York -- the salt content made my mouth feel like I was Moses walking aimlessly through the desert.)
Sonic shares currently trade at about 19 times next year's earnings forecast of $1.19, which is in a comfortable range with its expected earnings growth. If you want to buy an industry leader, then McDonald's is your pick. But I would purchase Sonic if you have a yen for underdogs with rock-solid niche fundamentals.
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Fool contributor Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.