Shares of BJ's Restaurants (NASDAQ:BJRI), Darden Restaurants (NYSE:DRI), and Chipotle Mexican Grill (NYSE:CMG) -- all restaurant stocks -- fell sharply on Thursday. By the time the market closed, the three stocks were down 8.8%, 7.2%, and 10.9%, respectively.

The beating these three stocks took comes amid a broader market sell-off over the past week. The market was hit hard yet again on Thursday. The S&P 500 shed 4.4% during the trading day, bringing the market index's total decline over the past week to nearly 12%.

However, the declines for BJ's, Darden, and Chipotle stocks on Thursday represent an outsize pullback compared to the market. This likely reflects concerns about how U.S. restaurant traffic could be negatively impacted in the case of a local outbreak of the virus. On Wednesday, the Centers for Disease Control and Prevention (CDC) confirmed the first coronavirus case in the U.S. in which the source of the infection is unknown, making this the first "community spread" of the virus in the U.S. Since the infected person's exposure to the virus is unknown, this means the coronavirus may already be spreading in the U.S. in unknown areas.

Investors may worry that, if the virus does break out in greater numbers in the U.S., consumers may avoid populated areas like restaurant chains.

Carne Asada Burrito bowl

Image source: Chipotle Mexican Grill.

Chipotle

Chipotle was hit the hardest of these three stocks. This may be because the stock trades at the priciest valuation, by far. Even after the stock's pullback, Chipotle has a price-to-earnings ratio of 60, as its premium valuation reflects a huge run-up over the past year. Including Thursday's decline, shares are up 26% over the past 12 months.

Of course, Chipotle deserves to trade at a higher valuation than BJ's and Darden because the company's revenue is growing by strong double-digit rates and earnings per share are soaring. Revenue in 2019 rose 15% year over year, fueled by an 11.1% year-over-year bump in comparable-restaurant sales. Adjusted earnings per share jumped 55% year over year to $14.05. 

BJ's Restaurants

Pressure on BJ's Restaurants stock today added to a sharp decline last week. Last Friday, the casual dining stock fell 13% when the company's fourth-quarter revenue missed analyst estimates.

Comparable-restaurant sales are growing much slower than Chipotle's, rising 0.4% year over year in Q4. BJ's stock has a far more conservative valuation than Chipotle, as it trades at just 14.5 times earnings.

Darden Restaurants

Darden has a pricier valuation than BJ's, trading at 20 times earnings. This reflects the company's healthier comparable-restaurant sales trends. In the company's most recent quarter, 4.2% year-over-year revenue growth was helped by the addition of 37 new restaurants and 2% comparable-restaurant sales growth.

While investors in these restaurant stocks should monitor the coronavirus situation, it wouldn't hurt to simultaneously be prepared to press the buy button if shares continue to get hammered, making them undervalued.