I've always thought chicken wings offered all the taste, nutrition, and culinary refinement of dipping your own fingers in barbecue sauce and subsequently trying to eat your hand. But the rapid expansion and full parking lots at wing-purveyor extraordinaire Buffalo Wild Wings (NASDAQ:BWLD) prove that I'm in the minority.
For those of you unfamiliar with the big, winged tatonka, Buffalo Wild Wings began with a single location near the Ohio State University campus. In the more than two decades since its founding, it has expanded to include over 250 locations. The newly public company's restaurants operate in locations and demographics similar to eateries run by peers like Darden Restaurants (NYSE:DRI), Brinker (NYSE:EAT), and Outback Steakhouse (NYSE:OSI).
Though Buffalo's recent fourth-quarter and full year numbers appear to show a company with slowing growth, Fools who peer a bit deeper may perceive a bargain. Sure, the $0.18-per-stub fourth-quarter earnings represent a drop from the $0.24 for the same period last year, but there was a $0.05-per-share charge for early debt payoff. Share dilution and crummier margins also dragged, counterbalancing a big 37% increase in revenues. (The share dilution was related to the IPO and retirement of some convertible stock. The margin situation is something the firm must remedy.)
For the full year, the same problems held back earnings. EPS ticked up a penny to $0.55. But looking past the bottom line, sales rose 31.6% to $126.5 million, and there's more of that to come.
A quick and dirty estimate of its two-year growth provides some tasty numbers to chew on. If the company hits its 2004 goals of 45 new franchises and 20 new company restaurants, these could provide around $40 million in new revenues for 2005. (Multiply 52 weeks by per-week average revenue by the number of new restaurants.) Factoring in the expected comps growth of 10% across the board, Buffalo Wild Wings could see a nearly 50% increase in revenues by then, and if costs are controlled, earnings might grow even more quickly.
You're probably thinking, this sounds a lot like one of Tom Gardner's Motley Fool Hidden Gems. Come to think of it, it does. The way things are looking, investors would be wise to give Buffalo Wild Wings a good look. This cash-rich company has plenty of room to roam, and its stock could be ready to fly.
Discuss the eatery industry in the Fool's Food board.
Fool contributor Seth Jayson may not like chicken wings, but he thinks he knows a stock bargain when he sees it. He owns no stake in any companies mentioned above. View his Fool profile here.
