What happened

Shares of casual-dining chain BJ's Restaurants (BJRI -0.70%) popped on Wednesday after a prominent analyst said the stock was one of his best investment ideas right now. Those are strong words that excited investors. And BJ's stock was consequently up 10% as of 2:15 p.m. ET.

So what

BJ's stock is now up more than 70% over the past year and outperforming the S&P 500 by a wide margin. But according to Wedbush analyst Nick Setyan, more upside could be ahead. As reported by Markets Insider, Setyan just put a $38 per-share price target on the stock, which implied about 19% upside before today's pop.

Setyan reportedly believes that same-store sales for BJ's are going to be strong in the second quarter of 2023. That seems like a reasonable expectation considering same-store sales increased by 9% in the first quarter.

Moreover, by Setyan's analysis, BJ's stock trades at an enterprise valuation of less than seven times adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2024, which he believes is too cheap to pass up.

Now what

Stock valuations encompass one aspect of investing, and Setyan points out that BJ's stock is cheap. But business growth is an important consideration as well, and this restaurant stock is showing promise there too, supporting an optimistic outlook.

Right now, BJ's has 216 restaurant locations and believes it can get to 425 long term. But it's slowed the pace of new openings; it only expects to open five new locations in 2023. However, its restaurant-level operating margin jumped to 12.6% in Q1 compared to 9.8% in the prior-year period.

That's a big one-year improvement. And if BJ's can keep improving profitability like this at the restaurant level, it may just be a matter of time before management accelerates new openings once again.