The Real Story: P.F. Chang's Is Overdone

Stock quotes in this article: PFCB , OSI , CAKE , OSI  

Currently, P.F. Chang's has 10 buys, 10 holds and only one sell rating among Wall Street analysts. The bulls suggest that the shares deserve a 30 to 35 times earnings multiple based on an expected 20% growth rate. I question whether P.F. Chang's will achieve 20% earnings growth. Even if there isn't some sort of big, bad event like more construction delays from last year, I believe the risks outlined above could chip away at operating margins and earnings per share.

Keep in mind, P.F. Chang's is already a crowded short. As of Dec. 15, 4.9 million shares (or 19% of the float) have been shorted. That's down from its 12-month high of 5.7 million shares in October. Nevertheless, I believe the shorts have this one right and will be rewarded in the next 12 months.
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Marc Lichtenfeld was previously an analyst at Avalon Research Group and The Weiss Group and a trader at Carlin Equities. He holds NASD 86,87, 7 and 63 licenses. His prior journalism experience includes being a reporter/anchor for On24 in San Francisco and a managing editor of InvestorsObserver, a personal finance Web site. He is a graduate of the State University of New York at Albany.

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