TheStreet Ratings

) --

Panera Bread


is scheduled to report quarterly earnings after the market close on Tuesday. Analysts are expecting the fast casual cafe chain to benefit from continued same store sales growth across its 1300+ restaurants.

Analysts are expecting Panera to report a second-quarter profit of $1.17 a share, compared with a profit of 85 cents in the year-ago quarter. Revenue is estimated to increase to $449 million from $378 million a year ago, according to a poll of analysts by Thomson Reuters. The company should continue to gain ground with new steak offerings including breakfast sandwiches, paninis and salads.

The following is taken from a first-quarter report published by

TheStreet Ratings

, an independent-research unit of


that uses a quantitative model to evaluate stocks.

Panera improved earnings per share by 32.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Panera increased its bottom line by earning $3.63 versus $2.78 in the prior year. This year, the market expects an improvement in earnings ($4.54 versus $3.63).

We rate Panera a "buy." This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. Our model has a price target of $172 on shares of Panera, offering the potential for 32% upside from current levels.

The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, Panera's return on equity exceeds that of both the industry average and the S&P 500.

>>For upcoming earnings and estimates, see our

Earnings Calendar


PNRA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, Panera has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.

From a valuation perspective, Panera's current price-to-earnings ratio indicates a significant discount compared to an average of 65.89 for the Hotels, Restaurants & Leisure industry and a significant premium compared to the S&P 500 average of 16.54. Conducting a second comparison, its price-to-book ratio of 6.29 indicates a significant premium versus the S&P 500 average of 2.23 and a premium versus the industry average of 5.98. The current price-to-sales ratio is well above the S&P 500 average, but below the industry average.

Equity research manager Chris Stuart, CFA, joined TheStreet Ratings after working as a senior investment analyst with Merrill Lynch covering small-cap equity and alternative investment strategies. Prior to that, Stuart worked for One Beacon Insurance as an actuarial analyst and at H&R Block as a financial adviser. Stuart earned his bachelor's degree in finance from the University of Massachusetts, Amherst. He holds a Chartered Financial Analyst (CFA) designation and is a member of the Boston Security Analysts Society (BSAS) and the CFA Institute.