Chuy’s (CHUY) is a Tex-Mex restaurant chain out of Austin, Texas. The concept is similar to an On the Border. This small chain of around 40 locations is expanding units at the rate of 35% a year — around double the rate Buffalo Wild Wings is. With most locations in and around Texas, CHUY has great growth opportunity.
One negative about Chuy’s is these restaurants don’t get great same store sales increases (maybe 1% to 5%). So to grow they have to expand, which they are doing, with recent revenue growth of 40%.
Another thing I didn’t like was the financials. It took forever for me to get the numbers I needed to complete my stock research. The annual report had different figures than Thomson had. For instance, did the company make 5 cents last quarter or 16 cents? I like crisp clear financials.
One Year Chart
Another negative on CHUY is the stock’s P/E is 49. I think some investors have gotten carried away with trying to get in and get some Chuy’s. I don’t think this stock can support a 50 P/E and would look for a pullback down to around $25 before getting in.
Profits along the bottom look good, except for next quarter’s estimate of -13% and the 4QtrsOut estimate of -6% growth. A stock with a P/E around 50 should have around 40% growth each quarter, the next four quarters show an average of 11% growth ahead.
Fair Value
I think a fair P/E is 35. That would mean the stock would have to come back into the $20s — which is where it was late last year.
Sharek’s Take
I think Chuy’s is all-hyped-up right now. The stock has been on a tear yet the numbers aren’t spectacular. I think we have flat same store sales growth ahead, and with the way CHUY reports, we could be looking at flat/negative profit growth in two of the next four quarters. Still, this the fastest growing restaurant around and needs to be bought if we can get a reasonable price. Look at CHUY in the mid-$20s.
View the Earnings Table here.View the Ten Year Chart here.
