Stock (Symbol) |
Chuy’s (CHUY) |
Stock Price |
$32 |
Sector |
| Retail & Travel |
Data is as of |
| March 21, 2016 |
Expected to Report |
| May 2 – May 6 |
Company Description |
 Chuy’s is a full service restaurant concept company offering a menu of Mexican and Tex Mex inspired food. The Company operates its restaurants under the name Chuy’s. As of December 28, 2014, the Company operated 59 Chuy’s restaurants across 14 states. The Company offers lunch and dinner, which includes enchiladas, fajitas, tacos, burritos, combination platters and daily specials, variety of appetizers, and soups and salads. Each of its restaurants also offers a variety of homemade sauces, including Hatch green chile and creamy jalapeno sauces. It also offers a bar in all of its restaurants providing its customers a variety of beverage offerings, featuring a selection of specialty cocktails, including its on-the-rocks margaritas made with fresh, hand-squeezed lime juice and the Texas Martini, a made-to-order, hand-shaken cocktail served with jalapeno-stuffed olives. Source: Thomson Financial |
Sharek’s Take |
 Chuy’s (CHUY) management seems to be underpromising to overdeliver. For 2016 the full-service Mexican restaurant chain projects profit growth of just 13% vs last year’s growth of 35%. Management also anticipates just 2% same store sales growth for the year, which seems odd as the company did 3% growth last qtr. CHUY has beaten the street by a good amount the last 4 qtrs and I feel the company could grow profits 20% to 25% this year. Chuy’s is a good long-term investment idea, as it has around 70 locations now compared to Qdoba/Dell Taco/Moe’s at 600. Taco Bell is the largest Mexican chain in the U.S. with 6000 locations followed by Chipotle at 1800. Chuy’s opened 10 locations last year to take its total from 60 to 70, and anticipates around 12 new restaurants in 2016. CHUY sells for 30x earnings which is slightly rich but justified considering the long-term growth opportunity. I feel this $32 stock is worth $34 this year and $38 next year. |
One Year Chart |
 CHUY broke out solidly last Summer when it put out 52% profit growth, but the stock has been back-and-forth since as results have come in good rather than great. That big qtr has caused comparisons to be tough 2QtrsOut with -3% profit growth anticipated. Otherwise, estimated profit growth looks good with 21% growth next qtr with 21% and 22% projected 3 and 4 qtrs out. |
Fair Value |
 I’m taking my Fair Value P/E down from 36 to 32. With that being said the stock has moderate upside this year and next. Again, management is probably low-balling 2016’s profit estimates so the restaurant might make more than the $1.05 projected. |
Bottom Line |
 Chuy’s is a small chain with big growth opportunity. The company is executing well by growing its store base moderately while also reducing costs. For 2016 management projects around 13% profit growth, which seems low considering the store count could rise 17%, thus I expect CHUY will keep beating the street. Chuy’s ranks 19th of 33 stocks in the Growth Portfolio Power Rankings but just misses the cut for the Aggressive Growth Portfolio. |
Power Rankings |
Growth Stock Portfolio
19 of 33Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
