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Aggressive Growth

Kona Grill (KONA - Snapshot Report) is a Zacks #1 Rank (Strong Buy) after posting beats in eight straight quarters and sees higher earnings estimates for 2012.

Company Description

Kona Grill, Inc. owns and operates upscale casual dining restaurants in the United States. Its restaurants offer prepared food items and alcoholic beverages. As of April 02, 2012, the company owned and operated 23 restaurants under the Kona Grill name in 16 states, including Arizona, Colorado, Connecticut, Florida, Illinois, Indiana, Louisiana, Maryland, Michigan, Minnesota, Missouri, Nebraska, Nevada, New Jersey, Texas, and Virginia. Kona Grill, Inc. is based in Scottsdale, Arizona.

KONA Tops Expectations for Eight Straight Quarters

Kona Grill has beaten the Zacks Consensus Estimate in each of the last eight quarters. Over the course of the last six beats, the stock has not really moved too much. Only two times the stock moved more than 6%. One of those moves was following the December 2010 quarter where the company beat earnings by 16% and the stock rose just about 7%.

Following the September 2011 quarter, the stock traded lower by a little more than 8%. The company ended up beating earnings by 33% and reported in line revenues. This was a deceleration from the massive beat in the prior quarter, which came in at 175% ahead of expectations.

Kona Grill Recently Reported Earnings

On February 9, 2012 the company reported revenue of $23 million roughly $1 million more than the Zacks Consensus Estimate and higher than the $22 million reported in the year ago period. EPS of $0.12 was $0.11 ahead of the estimate or a 1,100% beat. Following the report, the stock moved higher by 2.5%.

Earnings Estimates Bumped Up

Following the most recent earnings report, analysts bumped up their earnings estimates for 2012. The Zacks Consensus Estimate for 2012 EPS moved from $0.23 in January 2012 to the current level of $0.69. The 2013 estimate spiked higher following the recent earnings release, moving from $0.32 in January to the current level of $0.40.

Valuations

Kona Grill valuation picture is pretty much right in line with the industry average for the metrics that an aggressive growth investor will look at. The trailing twelve months and forward PE of 20x is slight ahead of the 17x and 15x industry average, respectively. The price to book multiple shows the largest premium of all the metrics, clocking in at 3.25x compared to 2.44x for the industry average. Price to sales is a low 0.5x, but still ahead of the industry average of 0.4x.

The Chart

When we look at the price and consensus chart for Kona Grill, we see a stock that has significantly trailed the earnings estimates for the stock. Generally when we see such a large gap between the earnings lines and the stock price, it is an indication that the stock is undervalued. In the case of Kona Grill, the two year streak of positive earnings surprises needs to see more significant increases in revenue, which has remained in the low 20's over the last six quarters. Kona Grill is a Zacks #1 Rank (Strong Buy).

Kona Grill - ticker KONA>
 
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Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service You can follow him at twitter.com/bbolan1

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