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Sonic Drives in Results

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.

Hungry? Check out one of the Fool's Food & Drink discussion boards.

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.

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