Please ensure Javascript is enabled for purposes of website accessibility

3 Fast-Growing Restaurant Stocks

By Rick Munarriz – Jul 12, 2016 at 5:09PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Dave & Buster's, Texas Roadhouse, and Buffalo Wild Wings lead the way when it comes to system-wide sales growth in NRN's latest Top 100 list of the largest casual dining chains.

Image source: Dave & Buster's.

Some eateries are growing faster than others. Industry tracker Nation's Restaurant News is out with its annual Top 100 list, taking a look at the country's 100 largest casual dining chains. 

It's a pretty big group of popular concepts, accounting for nearly 200,000 locations between them all. Let's take a look at the three best performers among the list when it comes to systemwide sales growth last year. There may be smaller chains growing faster, but these three -- all publicly traded -- are the ones showing the heartiest double-digit percentage growth among the 100 largest players according to Nation's Restaurant News.   

Dave & Buster's (PLAY 0.56%) -- 16.3% growth

It's easy to see why Dave & Buster's estimated sales per unit -- clocking in at $11.3 million -- leads the list. A little more than half of its revenue comes from the massive arcade's games and other diversions, entertaining customers between meals or drinks. However, Dave & Buster's is also on top of Nation's Restaurant News' Top 100 with its 16.3% uptick in systemwide sales growth.

Dave & Buster's has become a market darling since returning as a publicly traded company two years ago. It has beaten Wall Street's profit targets by 18% or better in each of its first seven quarters as a public company. Both sides of Dave & Buster's business are growing nicely, and the unique addition of high-margin prize redemption games make it less dependent on the ups and downs of food commodity costs. 

The stock has more than tripled since going public at $16 in late 2014. The game is just getting started, as Dave & Buster's expects to close out the year with 90 or 91 locations, less than halfway to its goal of eventually having 200 domestic units in operation. 

Texas Roadhouse (TXRH -2.10%) -- 12.8%

There's been a shakeout in the casual steakhouse market over the years, and Texas Roadhouse remains one of the rare stand-alone publicly traded players. Its Texas-sized portions, shelled peanuts at every table, and signature yeast rolls are making Texas Roadhouse a popular destination for seekers of comfort food and affordably priced steaks. 

Just 83 of Texas Roadhouse's 491 restaurants are run by franchisees. It increased its count by 32 mostly company-owned locations last year. It's only targeting 30 openings this year, but by forecasting another year of positive comps and an outlook for food cost deflation it should be another year of healthy earnings growth.   

Buffalo Wild Wings (BWLD) -- 10.5%

The bronze medalist -- but still no slouch in this list of 100 overall casual dining operators -- is the fast-growing chain that has made sports bars go mainstream. The family friendly establishments specialize in bone-in and boneless chicken wings that are doused in roughly two dozen sauce varieties. 

Just a little more than half of its 1,190 restaurants are company owned. It has been acquiring franchisees over the past year, and that along with unit development has helped pad top-line growth. Comps actually declined in Buffalo Wild Wing's latest quarter, but the chain finds a way to score when it matters the most. 

It's building out taco and pizza concepts, but its namesake sports bars continue to be the ones moving the needle. Buffalo Wild Wings expects comps to improve, and it also expects to benefit from food deflation. 

It joins Dave & Buster's and Texas Roadhouse atop of the Nation's Restaurant News Top 100. All three concepts still have plenty of expansion room to keep the healthy growth coming.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Buffalo Wild Wings and Texas Roadhouse. The Motley Fool recommends Dave and Buster's Entertainment. 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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.