Image via Rusty Gillespie/Flickr CC
Wingstop (WING) is a relatively small ($102 million) restaurant that specializes in wings (made three ways, with 11 enticing flavors), fries and sides, notes growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.
It’s a simple concept that’s worked wonders for the company, which has cranked out steady growth for years (2017 will be the 14th straight year of same-store sales growth!) as Wingstop has expanded its store base (store count up 17% on average during the past three years) and implemented a national advertising campaign.
The stock is strong today because a better-than-expected third-quarter report confirmed that the company’s growth could accelerate going forward — in Q3, both sales (up 19%) and earnings (up 31%) accelerated and topped expectations, domestic same-store sales rose 4.1% and the restaurant total increased 32 to 1,088 (including 994 in the U.S. in 44 states, mostly franchised).
Like many successful cookie-cutter stories, though, the real payoff is in the longer term, as the top brass believes there’s room for a whopping 2,500 Wingstops in the U.S. alone.
This should lead to many years of 10%-plus unit growth and near-20% earnings growth, with solid free cash flow, too.
Wingstop even pays a token dividend with a 0.7% annual yield, and has paid special dividends in the past. Throw in a few new twists that are boosting growth (it’s teamed up to provide delivery in some markets; results have shown sales rising an extra 10%) and there’s a lot to like here.
WING is thinly traded (about $20 million per day), but it looks like one of many stocks this year to be breaking out of a huge, post-IPO consolidation. The stock came public in mid-2015, fell more than 40% later that year, then rallied back to $33 last fall.
WING consistently hit resistance in the $33 to $35 range after that, but now it’s freewheeling — shares gapped up on earnings earlier this month and have pushed higher since. We’re OK buying some here.
Mike Cintolo is editor of Cabot Top Ten Trader.
Subscribe to Mike Cintolo’s Cabot Top Ten Trader here…
About MoneyShow.com: Founded in 1981, MoneyShow is a privately held financial media company headquartered in Sarasota, Florida. As a global network of investing and trading education, MoneyShow presents an extensive agenda of live and online events that attract over 75,000 investors, traders and financial advisors around the world.
Read Next
