This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Hamburger Stocks Worth a Nibble

Editor's note: As part of our partnership with Nightly Business Report, TheStreet's Debra Borchardt joined NBR on Monday (see video and transcript here) to discuss overlooked restaurant stocks that look ready to sizzle.

NEW YORK ( TheStreet) -- The explosive growth in up and coming chains like Five Guys, Smashburger and Elevation Burger have the old school fast food guys looking scared. McDonald's (MCD - Get Report) saw this coming and has made adjustments to fit the fast casual model. Sprucing up the restaurants and trying to improve the quality of the food has helped. But it's not possible to be all things to everyone and this is where fast food will lose customers.

Wendy's (WEN - Get Report) admits they are behind the curve. CEO Emil Brolick said on CNBC recently: "We're reimaging our restaurants." So far this has been done in only 10 locations where the company is "testing products that fit in that strategy," Brolick continued.

The turnaround is going to take some time though and as Wendy's slowly tweeks its approach, Five Guys and others will no doubt be happily stealing customers.

Fast casual dining stocks like Chipotle Mexican Grill (CMG) and Panera Bread (PNRA), are on a tear. Over the past year, Chipotle shares have jumped 38%, while Panera has gained 28%. Buffalo Wild Wings (BWLD) is another hot name, rising more than 50%.

Investors will probably see less performance out of these stocks going forward as profits are taken and growth slows. Fear not though, there are still some overlooked hamburger stocks poised to sizzle that could deliver some super-sized returns.

One is Red Robin Gourmet Burgers (RRGB - Get Report), which was recently upgraded by TheStreet Ratings to a buy. The chain is creating a new concept called Burger Works to better compete with the likes of Five Guys and SmashBurger. It looks like the build-out costs for these restaurants is lower than the standard Red Robin and more stores are planned for 2012.

Word on the Street

Successful Burger Works numbers could really drive Red Robin's valuation. Red Robin stock's is up nearly 60% in the past year, but based on Friday's close at $33.42, it's still below a 52-week high of $39.32, and is trading at a forward price-to-earnings multiple of 18.9X.

Red Robin is due to report its fiscal fourth-quarter results this coming Thursday, and Wall Street is mildly bullish ahead of the numbers with 6 of the 10 analysts covering the stock at strong buy (4) or buy (2), and the median 12-month price target is at $37, implying potential upside of 10.7% from current levels.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
SYM TRADE IT LAST %CHG
BJRI $46.18 0.00%
FRS $28.12 0.00%
MCD $99.28 0.00%
RRGB $85.37 0.00%
WEN $11.58 0.00%

Markets

DOW 18,285.74 +0.34 0.00%
S&P 500 2,130.82 +4.97 0.23%
NASDAQ 5,090.7940 +19.0510 0.38%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs