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Buffalo Wild Wings' Wild Card

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Given the tough economy, it was difficult to see this coming: Buffalo Wild Wings (Nasdaq: BWLD  ) has reported extremely spicy fourth-quarter results. 

Net income increased 28.7% to $7.7 million, or $0.43 per share. Total revenue increased 32.6% to $121.2 million. Same-restaurant sales jumped 4.5% at company-owned stores and 2.5% at franchised restaurants.

In yet another piece of pleasantly surprising news, the company said it believes its goals of 15% unit growth, 25% revenue growth, and 20% to 25% net earnings growth are achievable.

I really didn’t see this coming when I wrote about Buffalo Wild Wings’ third-quarter results. My thought was that with the economy doing so poorly, many people would opt to stay home and save money, particularly when it comes to kicking back and having a few beers. I guess I was wrong.  

Meanwhile, the restaurant industry has, for the most part, had a difficult time, with the exception of cheap eats like McDonald’s (NYSE: MCD  ) . Stocks like Ruth’s Hospitality (Nasdaq: RUTH  ) and Ruby Tuesday (NYSE: RT  ) have been hit hard as consumers’ propensity to cut the meals out has led to slower customer traffic. Consumers have even seriously slowed down on their coffee-guzzling at Starbucks (Nasdaq: SBUX  ) .

Buffalo Wild Wings certainly did achieve a victory in the current economic climate, and last I checked, the stock was up nearly 30%. There are still some things to think about, though. The company's still running negative free cash flow, like last quarter. And its cash and securities have dropped by 34.5% to $44.5 million. (Last quarter I was a bit concerned that the company was spending like a drunken sailor, although I also admitted that might actually be a smart move in tough times.) All the same, the company does have cash on hand, and no debt, both of which currently work in its favor.

With today’s surge, Buffalo Wild Wings shares trade at 21 times trailing earnings, which might look pricey compared to its peers; McDonald’s has been quite a performer, but it's only trading at 15 times earnings. Motley Fool Hidden Gems pick B-Dubs is showing impressive growth, and its yearly earnings did increase by 23.6%, so its multiple isn’t too out of whack. With the economy in rough shape, investors have learned to look for outliers that are performing well despite the troubles. At the moment, Buffalo Wild Wings looks like it fits the bill.

Buffalo Wild Wings is a Motley Fool Hidden Gems recommendation. Starbucks is a Motley Fool Inside Value selection and a Motley Fool Stock Advisor pick. The Fool owns shares of Starbucks and Buffalo Wild Wings. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax owns shares of Starbucks. The Fool has a disclosure policy.

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  • Report this Comment On February 12, 2009, at 2:49 PM, jrandomly wrote:

    I guess the shortage of chicken wings and commensurate price increases that everyone was talking about didn't hurt their bottom line!!!

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Related Tickers

10/21/2016 4:00 PM
BWLD $140.30 Up +0.85 +0.61%
Buffalo Wild Wings CAPS Rating: ****
MCD $113.93 Up +3.36 +3.04%
McDonald's CAPS Rating: ***
RT $3.10 Up +0.06 +1.97%
Ruby Tuesday CAPS Rating: *
RUTH $14.65 Down -0.15 -1.01%
Ruth’s Hospitality… CAPS Rating: ***
SBUX $53.63 Up +0.04 +0.07%
Starbucks CAPS Rating: ****