It's hard to find an eatery that has weathered the pandemic better than Wingstop (WING -2.53%). The fast-growing chain specializing in saucy chicken wings came through with another mouth-watering quarter on Wednesday morning, but it's still far from being on the radar of most growth investors. 

It's not a meme stock. You can't replace the first four letters of its corporate moniker with G-A-M-E and see it fly. But in a fickle world of finicky diners, Wingstop has rattled off 17 consecutive years of positive comps, and it didn't skip a beat during the darkest stretches of the COVID-19 crisis in the U.S. It's still serving up tasty financials, rapidly building out its expanding empire, and even rewarding its patient shareholders with a healthy trickle of dividend income. Pull up a chair. Grab some napkins. Let's dig into this tasty little stock.

Three platters of different Wingstop bone-in and boneless chicken wings.

Image source: Wingstop.

Atomic results

The 13 weeks ending March 27 were a busy time for Wingstop. Systemwide sales soared 30% to hit a record $558.9 million. Expansion is a big part of the concept's growth. It has seen its chain grow to 1,579 locations from 1,413 restaurants over the past year. But expansion isn't the biggest part of that 30% growth spurt. Domestic same-store sales soared 20.7%. 

You're going to see a lot of chains start posting spectacular comps in the coming quarters as year-over-year numbers benefit from the industry's softness through the early months of the pandemic last year. Wingstop was a rare bright spot. The 20.7% comps increase it just served up for its fiscal first quarter is stacked on top of a 9.9% increase a year earlier. Put another way, the average Wingstop location is ringing up 32.6% more in sales than it was two years ago. 

Wingstop's actual revenue for the first quarter is a modest $70.7 million, a 27.5% year-over-year increase. A whopping 98% of its locations are franchisee operated. Thankfully, this also means that Wingstop is largely collecting high-margin royalty revenue and franchise fees. This is a scalable business, and net income soared 62.5% to $13.2 million, or $0.44 a share. Analysts were only holding out for a profit of $0.31 a share. 

A net margin in the high teens isn't the kind of performance you'll see often at a company-owned restaurant, but it's what you'll find with a successful franchisee-fueled operation. Wingstop's adjusted EBITDA rose 46.2% to $23.9 million, an adjusted EBITDA margin of 33.8%.

The secret to Wingstop's success in the pandemic is that it was already a digital-savvy player. Even before we started to shelter in place last March, a hearty 80% of the small-box concept's sales were for off-premise consumption. It was generating 40% of its sales digitally for takeout and delivery. Digital sales are now up to 63.6% of the sales mix. 

It's also easy to see why franchisees are flocking to the simple concept given its limited yet cult-friendly menu, the small store footprint with just a few eat-in tables, and what is now a niche-leading $1.55 million in annual unit volume. 

The stock didn't open sharply higher on Wednesday because Wingstop posted preliminary financial results four weeks ago. Within four days of the fiscal period ending, it let investors know mostly everything we know now outside of its bottom-line beats and expanding adjusted-EBITDA performance. 

Wingstop should stretch its streak of positive comps to 18 years in 2021. It's sticking to its earlier three-to-five-year outlook of domestic comps in the mid single digits. It expects to grow its unit count on top of that by at least 10% a year in that time, but this morning it did boost its 2021 expansion goal to at least 11%. 

The lightly followed chain also declared another quarterly dividend. The stock's 0.4% yield isn't going to smoke out income investors, but between its quarterly distributions and meatier special dividends that aren't factored into that yield, it all adds up over time. If you were lucky enough to get in on its IPO at $19 six years ago, you will have made back $15.69 a share of that in payouts by the time its springtime dividend rolls out. 

Wingstop isn't at the top of the list when investors start talking about restaurant stocks. It's probably time to start introducing it into the conversation.