Panera Bread's (NASDAQ:PNRA) oven is heating up, and so is its stock price, now that its third-quarter revenue has been reported. The 35% boost in sales and 2.6% increase in comps gave way for the stock to rise nearly 7% today on the news. But while the results smell fresh, the rest of the story for Panera may leave your stomach feeling queasy.

As I wrote last month, the company needs a more even rise. While its top line has a compounded average annual growth rate of 28.6% over the past two years, diluted earnings per share have managed to grow only 10.6%. Even worse, cash flow has decreased at a rapid annual clip of approximately 34% over the same time period.  

Although higher expenses for labor and raw materials have nibbled away at the company's profits, management raised its guidance based on its "progress of margin improvement initiatives." The company now anticipates earnings of $0.35 to $0.37 a share, up from its previous guidance of $0.32 to $0.34.

No doubt, the company makes wonderful smelling and tasting bread, as well as great sandwiches, soups, salads, and an assortment of bagels and rolls. It is a fun place to hang out, and thanks to Panera's Wi-Fi connections, you can even bring your laptop. I'd rather go there than to Starbucks (NASDAQ:SBUX) -- at least I get to enjoy the aroma and the food, rather than just an overpriced cup of coffee. However, Panera also faces some pretty hefty competition, including the ubiquitous McDonald's (NYSE:MCD), which is moving into the coffee market and potentially targeting a more upscale customer.

Many companies are facing similar rising costs, and Chipotle's (NYSE:CMG) (NYSE:CMG-B) recent quarter confirms it. The question is how companies are dealing with it. Maybe Panera is finally getting a better grip on its expenses, but I think I need to see the full results -- the top and bottom lines -- before I chow down on this company as an investment.

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