Wingstop: Fast Growth in Wings and Fries

11/23/2017 5:00 am EST

Focus: CONSUMER

Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

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 it’s 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.


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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.

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