To celebrate the holidays, we here at the Fool are devoting extra virtual ink to all things consumer-focused in a special section called "The 12 Days of Christmas." Over the coming days, we'll have our "12 Days of Content" surrounding consumer-focused names that look set to profit or perish amid the holiday cheer.
If you've been hard at work filling holiday wish lists stuffed with pricey toys, an expensive stock may be the last thing you want to contemplate as the New Year approaches. But here are three undeniably expensive, high-quality restaurant stocks worth a look.
|
Company |
P/E (TTM) |
Price / Free Cash Flow (TTM) |
Forward P/E |
|---|---|---|---|
|
Chipotle Mexican Grill
|
46.1 |
43.4 |
36.4 |
|
Panera Bread
|
31.4 |
19.1 |
24.3 |
|
Starbucks
|
26.5 |
20.8 |
18.7 |
Source: Yahoo! Finance, Finviz.com.
P/E = price-to-earnings ratio. TTM = trailing 12 months.
No matter how you look at it, Chipotle, Panera, and Starbucks are expensive stocks trading at multiples well above the market average. All three have generated home run returns for investors in 2010 and the resulting price multiples are as rich as a holiday meal.
But investors didn't bid up the stock prices for nothing; there are many reasons to like these stocks. The restaurants have delivered a sweet and spicy blend of growth, returns, and balance sheet strength, deserving of a premium valuation.
|
Company |
5-Year Average Annual Sales Growth |
Net Cash ($Millions) |
|
|---|---|---|---|
|
Chipotle Mexican Grill |
26.4% |
22.8% |
211 |
|
Panera Bread |
23.1% |
18.9% |
195 |
|
Starbucks |
11.0% |
28.1% |
615 |
Source: Finviz.com, Morningstar.
Add to these figures the fact that all three companies have passionate founders still guiding the sleigh, a demonstrated willingness to return cash to shareholders via a dividend in the case of Starbucks or share buybacks in the case of all three, and well-regarded brands that should continue to increase in consumer awareness and relevance, and you have three stocks that are difficult to dismiss.
Now, I can't blame you for not running out and buying these stocks today, but do yourself a favor and add them to your watchlist now. All three dropped to irrationally low levels during the financial crisis despite having the qualities mentioned above. While it is unlikely those price points will be available again anytime soon, you never know when Mr. Market will offer a more attractive buying price, so be ready.
