Wingstop Inc.WING is currently one of the best-performing stocks in the U.S. restaurant space. With a decent share price appreciation, the stock is a profitable investment choice at the moment.
Shares of Wingstop have outperformed its industry in the past year. The stock has rallied 74.8% compared with the industry's growth of 1.7%. Moreover, an upward revision in earnings estimates for 2018 reflects analysts' confidence in the company's future earnings potential. Over the past 30 days, the Zacks Consensus Estimate for 2018 earnings rose 6.6%. Further, the company delivered positive earnings surprises in each of the trailing four quarters, recording an average beat of 16.15%.
Wingstop sports a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A. Back-tested results show that stocks with Momentum Scores of A or B, when combined with a Zacks Rank #1 or 2 (Buy) handily outperform others.
Let's delve deeper into the other factors that make this stock a solid pick.
Strong Top-Line Momentum
Wingstop relies on robust top-line growth, favored by the company's relentless focus on menu innovation and unit expansion. Various sales building initiatives have driven Wingstop's comparable sales in the last reported quarter. In the first quarter of 2018, the company's total system-wide sales increased 20.4% year over year, driven by 9.5% domestic same-store sales growth and a 12% increase in the number of restaurants since the first quarter of 2017.
Moreover, the company's new POS system that integrates online orders straight to the kitchen is expected to further bolster online ordering growth and lead to higher average check. Subsequently, the consensus estimate pegs sales for 2018 at $149.3 million, suggesting 41.5% growth from 2017.
Strong Margin Favors Earnings
Notably, a robust top line translated to growth in Wingstop's adjusted EBITDA in the first quarter of 2018. Also, strong margins in the company-owned restaurants resulting from favorable pricing are helping the company's bottom line to grow.
Arguably, earnings growth is of utmost importance for determining a stock's potential, as surging profit levels often indicate solid prospects (and stock-price gains). In 2018, Wingstop's earnings per share are expected to grow 9.5%.
Expansion As Growth Driver
Wingstop is relying on continual expansion to boost traffic as well as sales. In a bid to expand its international presence, Wingstop is likely to open restaurants in the U.K., France, Panama, Australia and New Zealand. In 2017, the company also signed two international development agreements for opening 110 restaurants across Australia and New Zealand over the next 10 years, and more than 70 restaurants in France for the next 12 years. Moreover, in the first quarter of 2018, the company added 24 net new restaurants to the Wingstop system, including six international locations.
Other Stocks to Consider
Other top-ranked stocks from the restaurant space include Arcos Dorados ARCO , Denny's DENN and Dine Brands DIN , each carrying a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here.
Arcos is expected to witness earnings growth of 23.7% in 2019, while Denny's and Dine Brands' earnings for 2018 are expected to be up 12.1% and 22.9%, respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.