Buffalo Wild Wings Vs. Panera Bread: Which Restaurant Is the Best Buy?

One restaurant innovates and forges strong strategic alliances adding to its stock's growth potential. Can you guess which one?

May 28, 2014 at 2:39PM

If you are looking for investment ideas you may want to consider chicken wing  restaurant chain Buffalo Wild Wings (NASDAQ:BWLD) and bakery-café restaurant  chain Panera Bread (NASDAQ:PNRA). However, investing legend Peter Lynch once said, "Know what you own, and know why you own it."  With that said you should always do your research to see if a company expands revenue and cash flow and retains some of that cash for reinvestment back into the business. Organizations, like individuals, need cash to survive.

The chicken wing magnet
As of the most recent quarter Buffalo Wild Wings and its franchisees operated a little over 1,000 locations.  Its sports atmosphere and product quality serve as draw for many consumers. Over the past five years Buffalo Wild Wings grew its revenue, net income, and free cash flow 158%, 178%, and 1,170%  respectively. In the most recent quarter, its revenue and net income  increased a whopping 21% and 73%, respectively. Quarterly sales and net income increases were due to same store sales increases of company owned (7%) and franchised stores (5%), the declining price of chicken, plus the addition of 101 new locations since the same time last year.

Buffalo Wild Wings' free cash flow swung from a negative $6.7 million in the first quarter of 2013 to a positive $22.4 million in the first quarter of 2014.  An increase in net income, positive contributions stemming from stock based compensation, favorable changes in assets and liabilities, most notably income taxes payable, and decreases in capital expenditures served as reasons for the recent increases in cash flow.  Buffalo Wild Wings' $80 million in cash equated to 16% of stockholder's equity. The company possesses no long-term debt  and pays no dividend.


Source: Motley Fool Flickr by Ben Popkins 

Soup, sandwiches, and pastries
Panera Bread sells soups, sandwiches, pastries, and beverages, made out of "wholesome" ingredients such as chicken free of antibiotics and artificial trans-fat.  As of the most recent quarter Panera and its franchisees operated 1,800 locations.  Over the past five years, Panera Bread's revenue, net income, and free cash flow grew 83%, 148%, and 39%, respectively.

However, Panera Bread's fundamentals didn't fare as well Buffalo Wild Wings in the most recent quarter. Panera Bread's revenue did increase 8% during the quarter . However, most of that increase came from the opening of new stores  versus same store sales which amounted to a minuscule 0.1%. It didn't help that year over year transactions decreased 2.8%  due to a number of issues that investors don't want to see, including "operational issues impacting customer service" and "intensified competition" . Increased expenses as a percentage of revenue caused Panera's net income to decline. 

Timing of accrued expenses, payment of deferred income taxes, and increased capital expenditures served as catalysts for the recent decline in free cash flow.  On the balance sheet, Panera Bread's $101 million in cash clocked in at 15% of stockholder's equity. The company possesses no long-term debt.  Panera Bread doesn't currently pay a dividend.

Now what?
Buffalo Wild Wings, via strategic partnerships, continues to innovate with new products and experiences such as chips and beverages.  Currently the company trades at 33 times earnings, which seems a little high. Investors should expect volatility and look for opportunities to buy shares on the downswing. As for Panera Bread, investors should wait and see if its operational issues clear up in a few quarters.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recent recruited a secret-development Dream Team to guarantee their newest smart device was kept hidden from the public for as long as possible. But the secret is out...and some early viewers are even claiming its everyday impact could trump the iPod, iPhone, AND the iPad. In fact, ABI Research predicts 485 million of these type of devices will be sold per year. But one small company makes this gadget possible. And their stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


William Bias has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings and Panera Bread. The Motley Fool owns shares of Buffalo Wild Wings and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information