U.S. Markets closed

Is Chipotle Too Pricey? Here Are 5 Low-Cost Restaurant Buys

Zacks Equity Research

Chipotle Mexican Grill, Inc. CMG reported impressive third-quarter 2019 results earlier this week, with both earnings and revenues soaring above the Zacks Consensus Estimate. However, such promising results have made the company’s shares too pricey for small investors.

In such a scenario, we have highlighted restaurant stocks that are quite affordable and have significant room for further growth.

Stellar Q3 Earnings for Chipotle

Chipotle’s third-quarter adjusted earnings of $3.82 per share beat the Zacks Consensus Estimate of $3.20. The company’s net income was reported at $98.6 million, up from $38.2 million in Q3 2018. Its revenues of $1.4 billion also outpaced the Zacks Consensus Estimate by 1.8% and advanced 14.6% year over year.

In fact, the company’s revenue growth in Q3 was a result of its increased attention to enhance customer experience by introducing food-safety programs, sales-building initiatives and superior digital innovation. (Read more)

Specifically in the quarter ended September 2019, comparable-store sales of Chipotle grew 11% compared with Q3 2018. A major factor behind the sales boost is the company’s offering of innovative new products, which successfully attracted customers’ attention. For example, Chipotle temporarily offered carne asada this year, which gave its sales a huge boost.

Image courtesy: CNBC

Second, the company has taken an initiative to make its drive-throughs digital, calling the concept “Chipotlane.” This new mode of digital-only drive-through could be a turning point for the company as well.

Given such impressive third-quarter earnings and revenues of Chipotle, it wouldn’t be a surprise if the company’s shares climb up ahead. In fact, the restaurant chain’s stock price closed at $788.19 on Oct 23. Besides, the restaurant chain also has a P/E of 61.50, which is much higher than the industry average of 20.00. (Read more: P/E Ratio: What Is It?)

4 Restaurant Stocks to Buy

Chipotle may have been a target for investors recently but not everyone can afford such a pricey stock. Therefore one can turn to other restaurant stocks, which have equally good potential for growth and have earned positive Zacks Earnings ESP (Expected Surprise Prediction).

In addition, these four stocks carry a Zacks Rank #2 and won’t burn a hole in investors’ pockets by virtue of their low-cost stock prices. You can see the complete list of today’s Zacks #1 Rank stocks here.

Restaurant Brands International Inc. QSR is the operator of quick service restaurants under brand names of Tim Hortons (TH), Burger King (BK) and Popeyes (PLK). The stock currently has an Earnings ESP of +0.15%.

Second, the Zacks Consensus Estimate for Restaurant Brands International’s third-quarter earnings is $0.72 per share, which suggests year-over-year growth of +14.3%. The Zacks Consensus Estimate for revenues is $1.46 billion, indicating a rise of 6.3% from Q3 2018. (Read more)

Finally, Restaurant Brands International’s closing price on Oct 23 was $67.90.

Dunkin' Brands Group, Inc. DNKN is the owner and operator of quick service restaurants globally. Some of the company’s segments include Baskin-Robbins International, Dunkin' U.S. and Dunkin' International. The stock currently has an Earnings ESP of +2.15%.

In addition, Dunkin' Brands has partnered with Beyond Meat, Inc. BYND to launch the Beyond Sausage Sandwich. The new product will be available from Nov 6 in more than 9,000 Dunkin' restaurants across the United States. This is bound to push sales higher.

Dunkin’ Brands also launched the Dunkin’ Bowls in April, which consists of an egg white bowl of 14 grams of protein and is only 250 calories. The company’s innovative products and strong brand presence are extremely innovative. Finally, Dunkin' Brands’ closing price on Oct 23 was $74.68.

Wingstop Inc. WING is an operator of restaurants under the brand name Wingstop. The restaurants offer cooked-to-order, hand-sauced and tossed chicken wings. Wingstop is expected to report its Q3 earnings on Oct 30. The stock currently has an Earnings ESP of +5.62%. Second, the Zacks Consensus Estimate for the restaurant chain’s Q3 revenues is $49.52 million, indicating a rise of 29.5% from third-quarter 2018. (Read more)

Finally, Wingstop’s closing price on Oct 23 was $84.32.

Shake Shack Inc. SHAK is the operator of Shake Shack restaurants in the United States and globally. The restaurant offers hamburgers, crinkle cut fries, hot dogs, chicken, shakes, beer, wine and frozen custard etc. Shake Shack is expected to report third-quarter earnings results on Nov 4. The stock currently has an Earnings ESP of +2.27%. Shake Shack’s closing price on Oct 23 was $84.53.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>

Click to get this free report Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report Restaurant Brands International Inc. (QSR) : Free Stock Analysis Report Dunkin' Brands Group, Inc. (DNKN) : Free Stock Analysis Report Shake Shack, Inc. (SHAK) : Free Stock Analysis Report Wingstop Inc. (WING) : Free Stock Analysis Report Beyond Meat, Inc. (BYND) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research