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

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.