2009-03-11 / The Motley Fool

Buffalo Wild Wings

The Motley Fool Take

The restaurant industry has largely had a difficult time in this economy, with the exception of cheap eats such as McDonald's. But Buffalo Wild Wings (Nasdaq: BWLD) recently reported spicy fourthquarter results, with net income increased up 29 percent to $7.7 million and revenue up 33 percent to $121.2 million. The company believes its goals of 15 percent unit growth, 25 percent revenue growth and 20 to 25 percent net earnings growth are achievable.

But the company is running negative free cash flow, like last quarter, with cash and securities down 35 percent to $45 million. Still, the company does have cash on hand and no debt, both of which cur- rently work in its favor.

After a surge in its stock price, Buffalo Wild Wings shares recently traded with a P/E ratio around 21, which looks pricey compared to its peers. (McDonald's has been quite a performer, but its P/E is only around 15.) But the company is showing impressive growth, and its yearly earnings did increase by 24 percent, so its P/E isn't too out of whack. With the economy in rough shape, investors have learned to look for outliers that are performing well despite the troubles. At the moment, Buffalo Wild Wings looks like it fits the bill.

(Buffalo Wild Wings is a Motley Fool Hidden Gems recommendation, and The Motley Fool owns some shares of it.)

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