Wings. Beer. Sports. Motley Fool Hidden Gems recommendation BuffaloWild Wings' (NASDAQ:BWLD) website says it all. Sounds like a winning combination to me, but if we peer into the future, will investors be able to add the phrase "ten-bagger" to the beer gut that will come with too many trips to the burgeoning hangout?

So far, so good
Buffalo Wild Wings' stock has performed well since the company issued shares to the public back in late 2003. The price has nearly doubled from the offering price of $17; it now stands at $31.96. And the shares are well off their highest price ever of $44.18, reached earlier this year. The shares really got clipped after the company missed average analyst earnings estimates by a measly penny. However, sales and earnings both grew close to 30% for the second quarter, giving investors an opportunity to pick up some stock before it might take flight again.

Buffalo Wild Wings' history as a publicly traded company is obviously limited, but sales and earnings growth have been as impressive as second-quarter results:

Annual %




Sales Growth




Earnings Growth




Net Margin




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

Respect is something you earn
No, this is not a Morgan Stanley commercial (remember "One investor at a time?"), but an important lesson for a young company. To gain respect as an enduring concept, investors demand a solid track record of sales growth, positive same-store sales, and growing cash flow.

Historical data points are a way to determine how management handles adversity, be it domestic bird flu scares or a hitch in opening new stores. As an example, investors now are concerned that things are going too well at Starbucks (NASDAQ:SBUX), since customers may be tiring of waiting in the coffee chain's long lines.

But all firms must start from square one, and Buffalo Wild Wings is putting together an enviable track record. Even Starbucks has experienced some growing pains, but it has rewarded shareholders with astronomical returns since it went public. I'm not saying that Buffalo Wild Wings will return close to what Starbucks has, but so far, so good.

Casual dining woes
The casual-dining space of the restaurant industry is under the heat lamp at present, because the market is concerned that it will bear the brunt of rising gas prices and interest rates that leave less disposable income for eating out. Pizza Hut is struggling, as is Outback Steakhouse. As a result, parent firms Yum! Brands (NYSE:YUM) and OSIPartners (NYSE:OSI) are trading near 52-week lows. Buffalo Wild Wings fits into the casual category, but does that mean it will suffer the same fate as the weaker firms in the flock?

Hot concept, cool financials
In short, I doubt it. Long-term investors know how to turn short-term pain into long-term gain by taking advantage of an overly pessimistic Mr. Market. Buffalo Wild Wings is gaining respect as a rapidly growing concept, and it should be able to ride out any short-lived industry difficulties. Indeed, current secular trends still support the argument that the U.S. is working harder than ever, which leaves less time to cook at home. That's a clear positive for restaurant stocks such as Buffalo Wild Wings.

I also like that the management team is conservative and working to improve margins in addition to growing the store base. It's also expanding with internally generated funds, meaning that it's not relying on debt, which derailed certain concepts like Boston Market, now owned by McDonald's (NYSE:MCD).

The Foolish bottom line
Right now, the one-year forward P/E of 18 for Buffalo Wild Wings is reasonable, given that analysts on average are calling for annual earnings growth of 25% for the foreseeable future. I estimate the company would have to grow earnings about 27% for the next five years to justify the current stock price. That's no small feat, but in terms of opportunity cost, I'm hard-pressed to find another restaurant concept growing as fast as Buffalo Wild Wings right now, especially given the decent multiple and balance-sheet propriety.

With only a couple hundred million in total annual sales, there are plenty of growth opportunities out there for Buffalo Wild Wings. There will obviously be pitfalls along the way, but I like management's discipline.

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

Fool contributor Ryan Fuhrmann is long shares of McDonald's but has no financial interest in any other company mentioned. Starbucks is a Stock Advisor recommendation. The Fool has an ironclad disclosure policy. Feel free to email Ryan with feedback or to discuss any companies mentioned further.