Last week I talked about my love of burgers and highlighted some fast food stocks you might want to invest in. I decided to keep the food theme going this week and talk about casual dining stocks.
This industry has been hit hard over the past few years. More competition makes it more expensive for these businesses to keep customers loyal and to attract new customers. Add to this a push from consumers to shy away from dining out and spending their money in other areas and you get a struggling industry with few stars to invest in.
But there are some shining casual dining stocks that are making money and can make you money as well. Let’s look at 3 of these companies to see which one is most deserving of your investment dollars.
3 Casual Dining Stocks That Will Make You Money
#1. Dave & Busters (NASDAQ: PLAY)
Dave & Buster’s has a unique take on the casual dining environment. They combine dining with play. When you visit a Dave & Buster’s, you can play arcade games, billiards, skee-ball and more. This unique take on dining has responded well in the tough years the industry has been experiencing.
When the company reported earnings, they beat estimates again. They also raised their outlook for 2017 as well. This led to the stock trading higher. In fact, the stock is up over 60% in the past year.
While that might spook some investors looking for a bargain, the stock may still be a bargain even with this run up. The reason is because Dave & Buster’s show no sign of slowing down. They are doing everything right and as consumers look to save money, they are drawn to the Dave & Buster’s model of combining eating and playing.
Plus, the company has little to no competition. While some casual dining restaurants can add some gaming to their locations, they cannot do what D&B is doing on a full scale basis.
In other words, don’t let the run up in stock price scare you away.
#2. Zoe’s Kitchen (NYSE: ZOES)
If you are committed to finding a value play when it comes to casual dining stocks, Zoe’s Kitchen might be the one for you. Shares are down 50% after the company missed estimates. While the sluggishness of the casual dining industry scared away investors with regards to Zoe’s, the company has a lot going for it.
For instance, even though they missed estimates, revenue was still up 18%. They also reported an increase in same store sales of 0.7%. While this number doesn’t sound glamorous, know that for 28 straight quarters Zoe’s Kitchen has reported same store sales growth.
So while they did miss estimates, they have a lot going for them. And they have a bright future as well. This is because they are reinvesting heavily in the business. For 2017 they are looking to add an additional 40 stores.
And they are spending money to update current locations, their website and app to help keep consumers coming back. They are also changing up their menu on a regular basis.
This is a no-brainer with the environment we are in with regards to casual dining stocks. With so much competition, you have to keep innovating in order to keep your customer and attract new ones. Zoe’s Kitchen understands this and is spending the money as a result. This should lead to nice growth in the coming years.
#3. Wingstop (NASDAQ: WING)
People love their wings as evidenced by the success of Wingstop. The company has beaten estimates by an average of 12% over the past year and the company is primed to continue churning stellar results.
Net income grew last year by 50%, while revenues were up 15% in 2016. The only downside to Wingstop was that same store sales slowed from 12% to 3%. But it is hard to argue against a stock when they are crushing their estimates like Wingstop has been.
What makes this company unique is that it offers 3 dining experiences. You can eat in, order food to go or even have it delivered. So no matter what mood you are in, Wingstop has you covered. This is why customers love them.
Another reason to love Wingstop is the franchise owners. They love this company and over 80% of them own more than one location. That tells you something. When owners of the individual stores are happy and making money, you know the company is worth investing in. If it weren’t a good company, franchise owners wouldn’t be adding more locations to their portfolios.
So there are 3 shining casual dining stocks for you to consider investing in. Any one of them will see growth in the coming years, just make sure you don’t over invest in all of them. You want to make sure you are well diversified so that if a pull back in any one industry comes along, you are not going to lose your shirt.
Have a plan when investing and stay diversified and you can make money when investing in casual dining stocks.