With a growing number of Americans considering fast food a luxury, at least based on a May survey from LendingTree (TREE), it will likely surprise some to find that Wingstop (WING) has not suffered the kind of pullback that places like McDonald’s (MCD) have seen. But some key factors have helped buoy Wingstop and helped it avoid many of the problems its contemporaries have seen. Still, this did not help shares much, as Wingstop was down fractionally in Monday afternoon’s trading.
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One of the biggest factors giving Wingstop a boost is the value of sports. We have already seen some companies make great gains with sports lately; Paramount (PARA) did little to cut back its sports operations despite making major cuts throughout the operation recently. But since chicken wings and sports tend to go well together, this gave Wingstop a boost.
As Jim Salera, equity research analyst with Stephens, noted, those who are planning social events—and sports viewing is a common social activity—tend not to cut their spending in those areas. That helps insulate Wingstop from cutbacks, as it is not just dinner that is at stake, but rather, dinner and an event. It’s worth noting that, so far, Salera has enjoyed a 100% success rate on WING stock, with an average return of 7.92% per rating.
All This and Growth Potential
We have just established that Wingstop is comparatively protected from a downturn by its sports connection. However, it may be an excellent growth stock as well. Several factors contribute to this assessment, starting with earnings growth. Wingstop’s historical earnings per share (EPS) growth rate is 33.3%. Pretty good for starters, but it gets better; its projected EPS growth rate is around 51.2%, which blows away the industry average of 6.8%.
Further, Wingstop has also seen analysts issue positive earnings estimate revisions, which suggests an excellent potential for future growth. And its improvements in year-over-year cash flow growth, coming in at 31.1% against the industry average of 11.8%, only makes things that much better.
Is Wingstop a Good Stock?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WING stock based on eight Buys and eight Holds assigned in the past three months, as indicated by the graphic below. After a 147.24% rally in its share price over the past year, the average WING price target of $411.57 per share implies 2.12% upside potential.
