Have you been paying attention to shares of The Chefs' Warehouse (CHEF)? Shares have been on the move with the stock up 29% over the past month. The stock hit a new 52-week high of $39.26 in the previous session. The Chefs' Warehouse has gained 86.9% since the start of the year compared to the -9.1% move for the Zacks Consumer Staples sector and the -7.4% return for the Zacks Food - Miscellaneous industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 1, 2018, Chefs' Warehouse reported EPS of $0.24 versus consensus estimate of $0.21 while it beat the consensus revenue estimate by 3.67%.
For the current fiscal year, Chefs' Warehouse is expected to post earnings of $0.78 per share on $1.43 billion in revenues. This represents a 77.27% change in EPS on a 9.89% change in revenues. For the next fiscal year, the company is expected to earn $1.01 per share on $1.55 billion in revenues. This represents a year-over-year change of 29.49% and 8.54%, respectively.
Chefs' Warehouse may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Chefs' Warehouse has a Value Score of D. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 49.1X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 32X versus its peer group's average of 12.1X. Additionally, the stock has a PEG ratio of 2.59. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Chefs' Warehouse currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Chefs' Warehouse fits the bill. Thus, it seems as though Chefs' Warehouse shares could still be poised for more gains ahead.
How Does Chefs' Warehouse Stack Up to the Competition?
Shares of Chefs' Warehouse have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Sysco (SYY), Industrias Bachoco, S.A. de C.V. (IBA), and Glanbia Plc (GLAPY), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Chefs' Warehouse. Still, the fundamentals for Chefs' Warehouse are promising, and it still has potential despite being at a 52-week high.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.