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Kona Grill Inc.

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Shares of Kona Grill Inc. have been steadily climbing since April 30, 2012, when it reported a phenomenal first quarter earnings surprise of 333.3%. With an average surprise of 410.4% over the trailing four quarters and expected earnings growth of 64.5% in 2012, this casual dining restaurant looks like a solid pick for growth-seeking investors. The company is presently a Zacks #1 Rank (Strong Buy).

Stupendous First Quarter

Kona Grill reported impressive first quarter results with EPS increasing 1400% year-over-year to 13 cents, beating the Zacks Consensus Estimate of 3 cents.

Restaurant sales for the quarter increased 8.6% year-over-year to $24.2 million, primarily led by a same-store sales growth of 8.7%. The improvement in same-store sales was driven by a 6.4% growth in guest traffic and a comparatively higher average guest check. Restaurant operating profit margin surged 480 basis points in the quarter to 19.9%.

For the second quarter of 2012, Kona Grill expects EPS of 14 cents, compared with 8 cents in the year-ago period. Restaurant sales are expected to grow marginally to $24.7 million from $24.5 million in the year-earlier quarter.

Surge in Earnings Estimate Revisions

Over the past 90 days, the Zacks Consensus Estimate for 2012 increased 88.9% to 51 cents, implying a year-over-year growth of 64.5%. For 2013, the Zacks Consensus Estimate has increased 68.6% to 59 cents over the same period, representing a year-over-year growth of 14.7%.

Premium Valuation

Kona Grill is currently trading at a premium on a price-to-earnings (P/E) basis. Shares of Kona Grill are at a forward P/E of 17.63x, versus the peer group average of 13.26x. Its PEG ratio is 1.01 based on a 5-year EPS growth rate of 17.5%. A healthy earnings growth prospect warrants the premium valuation of the company.

Chart Resonates Growth Potential

Since April 13, 2012, Kona Grill shares have consistently fared better than the simple moving average for 50 days or SMA (50) and simple moving average for 200 days or SMA (200). The stock has also outperformed the NASDAQ since April 16, 2012, with a year-to-date return of 46.89% compared with a NASDAQ tally of 13.27%.

Based in Scottsdale, Arizona, Kona Grill owns and operates 23 upscale casual dining restaurants in diverse locations in the U.S. Its restaurants offer prepared food items and alcoholic beverages with a personalized service and a warm contemporary ambience that creates a special, yet affordable dining experience. The company presently has a market cap of $79.36 million.

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