Dining On Fast Food Profits

By Aryeh Katz | September 14, 2010 AAA

It could be because going out for dinner in these tougher economic times now means supping downscale, or it might indicate a renewed willingness on the part of consumers to begin spending, albeit cautiously, on a simple evening on the town. But whichever way you slice it, folks are spending more - and in some cases, a lot more - at fast food outlets since the year began.

IN PICTURES: 6 Simple Steps To $1 Million

The PowerShares Dynamic Food and Beverage ETF (NYSE:PBJ), which includes 30 American stocks engaged in the food and beverage industries, is up just under 14% for the year. But the following trio of restaurants beats that performance by a wide margin. Here are the winners in the restaurant stock rally, year-to-date.

Ariba!
Chipotle Mexican Grill, Inc. (NYSE:CMG) has been far and away the choice of Americans looking for a relatively cheap night out on the town. Chipotle serves up a mix of tacos, burritos and salads at its 950+ restaurants scattered across North America, and has served up investors with extraordinary gains since the year began, too. CMG stock has risen more than 88% during that period and now sports a P/E of 35.1 and a market cap in excess of $5.1 billion. Since New Year's, the SPDR S&P 500 ETF (NYSE:SPY), a proxy for the broad market index, has gained less than half a percent.

Latest quarter earnings for Chipotle came in ahead of analysts' expectations, propelling the stock higher in the last month's trade. Wall Street had expected $1.39; the company delivered $1.46.

CMG stock pays no dividend.

Dough to the Dough Makers
Domino's Pizza, Inc.'s (NYSE:DPZ) stock is up over 65% since the year began. Its 9,000 outlets worldwide give the firm a market cap of $820 million. The stock trades with a P/E of 9.2 and pays no shareholder dividend.

DineEquity, Inc. (NYSE:DIN) is the owner, operator and franchisor of International House of Pancakes (IHOP) and Applebee's Neighborhood Grill and Bar restaurants. The company's stock has risen nearly 67% since January 1 and trades without a P/E as the company has yet to post positive annual earnings.

The Bottom Line
Restaurants are putting their best foot forward in 2010, outperforming the broad market by a good measure. And while the reasons for the surge are not clear, investors hungry for profits should consider the above three, star performers from the food and beverage menu. (To learn about the restaurant stock sector analysis, read Sinking Your Teeth Into Restaurant Stocks.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus
Related Analysis
  1. Tepid Market Waters Across the Globe - Ahead of Wall Street
    Stock Analysis

    Tepid Market Waters Across the Globe - Ahead of Wall Street

  2. First Negative Week in a Month? - Ahead of Wall Street
    Stock Analysis

    First Negative Week in a Month? - Ahead of Wall Street

  3. I've Seen It, But I Don't Believe It - Ahead of Wall Street
    Stock Analysis

    I've Seen It, But I Don't Believe It - Ahead of Wall Street

  4. ECB Finally Does QE - Ahead of Wall Street
    Stock Analysis

    ECB Finally Does QE - Ahead of Wall Street

  5. Big Week for Econ Data - Ahead of Wall Street
    Stock Analysis

    Big Week for Econ Data - Ahead of Wall Street

Trading Center