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Bull of the Day: Wingstop (WING)

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Wingstop Inc. (WING - Free Report) is finding a restaurant sweet spot in low cost stores which target Millennials. This Zacks Rank #1 (Strong Buy) is expected to see double digit earnings growth in both 2016 and 2017.

Wingstop operates and franchises 914 restaurants in the United States, Mexico, Singapore, the Philippines, Indonesia and the United Arab Emirates.

It features 11 distinctive wing flavors including Original Hot, Cajun, Atomic, Mild, Teriyaki, Lemon Pepper, Hawaiian, Garlic Parmesan, Hickory Smoked BBQ, Louisiana Rub and Mango Habanero. It also offers house-made sides including hand cut, seasoned fries.

Another Beat in the Second Quarter

On Aug 4, Wingstop reported its second quarter results and beat the Zacks Consensus Estimate by a penny.

Domestic same-store-sales were up 3.1% as total revenue rose 18.2%.

It added a net of 41 new restaurants in the fiscal second quarter as system-wide restaurant count increased 16.4% to 914 worldwide.

The company managed to produce solid numbers despite the higher cost of chicken wings, which rose 8% year over year.

But Wingstop's low cost business model helped alleviate some of that cost issue. It has a limited menu with wings and just a few sides.

Its stores are also small as 75% of its business is takeout.

Wingstop has really been pushing its brand with the Millennial market. Millennials now make up about half of its customer base.

Analysts Bullish About the Future

The analysts like what they are seeing and are even raising estimates ahead of fiscal third quarter results which will be out on November 1.

2 estimates have been raised for the third quarter and the full fiscal year in the last week. Usually, analysts are leery about raising estimates just ahead of an earnings report. They only do so if they feel good news is definitely coming.

The fiscal 2016 Zacks Consensus Estimate has risen to $0.56 from $0.55 in the last 7 days. That is earnings growth of 18%.

Fiscal 2017 is also looking up, with earnings growth of 11.7% expected.

Big Rally in 2016

Wingstop went public in 2015 so it is a "new" stock.

Shares have soared in 2016, however, as the company continues to post solid same-store-sales growth and its growth rate remains elevated.

However, investors aren't getting it cheap. It trades with a nosebleed forward P/E of 52.

For those looking for the next hot restaurant concept, Wingstop is one that should be on the short list.

Now, which stocks should you sell?

As a Zacks Rank #1 Strong Buy, this Bull of the Day deserves consideration. But today there are 220 Zacks Rank #5 Strong Sells that demand even more urgent attention. If any of these are lurking in your portfolio, they should be removed immediately. Since 1988, such stocks have actually performed more than 11X worse than the S&P 500.

See all Zacks Strong Sells and Strong Buys absolutely free >>.

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