I have to commend Anders Bylund for kicking the tires and comparing Buffalo Wild Wings (NASDAQ:BWLD) to some of the other yummy casual-dining stocks out there. Overall, his point of contention regarding B-Dubs can be summed up as follows:

"I think there are better opportunities available in the hotly contested casual dining sector, and I believe that the sector itself may be an endangered investment species. The longer your investment horizon is, the riskier I think BW3 gets."

My first bone to pick is a minor one, but this is a Foolish Duel, right? The company is no longer referred to as BW3 -- somewhere along its growth path, Buffalo Wild Wings lost the "& Weck" ending -- maybe it couldn't keep pace with the rapid expansion. CEO Sally Smith recently pointed out that people still refer to the company as "B-Dubs," so let's use that for the time being.

Let's also see if there are really better opportunities out there using the Bylund "Super-Six Index" of casual dining stocks. Here are some other metrics to chew on:


5-Year Earnings Growth

Projected Earnings Growth



Buffalo Wild Wings





Brinker (NYSE:EAT)





Applebee's (NASDAQ:APPB)










Ruby Tuesday (NYSE:RI)





Darden (NYSE:DRI)





Source: Capital IQ, A Division of Standard & Poor's

From what I see, Buffalo Wild Wings has the highest historical growth (metrics go back before it went public) and the highest average growth projected by analysts. Judging by Anders' forward P/E stats, I don't think investors are paying too much for B-Dubs' higher growth expectations. I also added return on invested capital (ROIC) to the chart, a favorite Fool metric that takes into account return on assets and a company's leverage. Again, B-Dubs matches up well (except perhaps for a more mature Darden), and lower returns can be expected for a smaller company in the rapid growth stages of its existence. Heck, there are plenty of growing chains that can't even turn a profit while expanding. Try Caribou Coffee (NASDAQ:CBOU), Buca, or Champps on for size.

In addition, Anders and I differ in our opinions of debt. He suggests that debt can effectively be used to supercharge growth by fueling expansion with other people's money. The good thing about ROIC is that it levels the playing field by taking debt into consideration, eliminating the ROA advantage Anders awarded to Red Robin. As I mentioned in my opening, using internally generated funds to expand is more conservative and will keep a struggling chain out of bankruptcy court. Even so, Buffalo Wild Wings is growing more than 20% per year; how much more growth are we looking for? Slow and steady is not a bad route, especially considering that Buffalo Wild Wings is still one of the fastest-growing restaurateurs out there.

Finally, we both appear to agree that high gas prices and rising interest rates are taking their toll on casual-dining operators right now. Anders would prefer to avoid the entire industry, yet Buffalo Wild Wings managed to grow close to 30% for its most recent quarter. At 18 times forward earnings, the stock appears to already discount a certain amount of short-term pain, and the multiples on the Bylund Super Six Index are also down because of current difficulties. With the market pricing in today's struggles, it's important to look past this cycle and take a longer-term perspective, something Mr. Market has proven somewhat inept at taking into account.

For Buffalo Wild Wings, with a market cap just shy of $300 million, there is plenty of remaining growth, even if consumers eat at home for a while. There will be inevitable pitfalls, but as long as the company continues to prudently manage its growth prospects, the stock could duly reward shareholders with a three- to five-year investment horizon.

Think you're done with the Duel? You're not! Go back and read the other three arguments, and then vote for a winner.

Buffalo Wild Wings is a Motley Fool Hidden Gems recommendation. Find more tasty small-cap stocks with a free 30-day trial subscription.

Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. The Fool has an ironclad disclosure policy. Feel free to email Ryan with feedback or to discuss any companies mentioned further.