Warren Buffett attracts a lot of attention. As the world's third-richest person and most celebrated investor, thousands try to glean what they can from his thinking processes and track his investments.

While we can't know for sure whether Buffett is about to buy Panera (Nasdaq: PNRA) -- he hasn't specifically mentioned anything about it to me -- we can discover whether it's the sort of stock that might interest him. Answering that question could also inform whether it's a stock that should interest us.

In his most recent 10-K, Buffett lays out the qualities he looks for in an investment. In addition to adequate size, proven management, and a reasonable valuation, he demands:

  1. Consistent earnings power.
  2. Good returns on equity with limited or no debt.
  3. Management in place.
  4. Simple, non-techno mumbo jumbo businesses.

Does Panera meet Buffett's standards?

1. Earnings power
Buffett is famous for betting on a sure thing. For that reason, he likes to see companies with demonstrated earnings stability.

Let's examine Panera’s earnings and free cash flow history:

Pnra

Source: Capital IQ, a division of Standard & Poor's. Free cash flow is adjusted based on author’s calculations.

Over the past five years, Panera has grown its earnings and free cash flow through a combination of store openings and same-store sales growth.

2. Return on equity and debt
Return on equity is a great metric for measuring both management's effectiveness and the strength of a company's competitive advantage or disadvantage -- a classic Buffett consideration. When considering return on equity, it's important to make sure a company doesn't have an enormous debt burden, because that will skew your calculations and make the company look much more efficient than it actually is.

Since competitive strength is a comparison between peers, and various industries have different levels of profitability and require different levels of debt, it helps to use an industry context.

Company

Debt-to-Equity Ratio

Return on Equity (LTM)

Return on Equity (5-year average)

Panera

0%

19%

16%

Darden Restaurants (NYSE: DRI)

84%

24%

28%

The Cheesecake Factory (Nasdaq: CAKE)

9%

15%

11%

Chipotle Mexican Grill (NYSE: CMG)

0%

23%

16%

Source: Capital IQ, a division of Standard & Poor's.

Panera produces moderately high returns on equity without debt.

3. Management
Executive Chairman and co-founder Ron Shaich was CEO from 1994-2010, when William W. Moreton took over the CEO reins. Prior to that, Moreton had worked at Wendy’s, Potbelly, and Panera.

Shaich made two interesting comments in 2010 that were indicative of a long-term focus: "In my experience, the best time to grow is during a recession," and, "The best way to take care of our shareholders is by making sure our employees are taken care of.”

4. Business
Though competitive, the restaurant industry isn’t particularly susceptible to technological disruption.

The Foolish conclusion
Regardless of whether Buffett would ever buy Panera, we've learned that it exhibits many of the quintessential characteristics of a Buffett investment: consistent or growing earnings, reasonably high returns on equity with limited debt, tenured management, and a straightforward business.

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Ilan Moscovitz owns shares of Chipotle Mexican Grill. You can follow him on Twitter @TMFDada. The Motley Fool owns shares of Chipotle Mexican Grill. Motley Fool newsletter services have recommended buying shares of Chipotle Mexican Grill and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.