With shares of Panera Bread Co. (NASDAQ:PNRA) trading at around $157.17, is PNRA an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
Panera has healthy margins, excellent cash flow, and an ROE of 23.49 percent. Panera is trading at 26 times earnings, which is right at the industry average. The vast majority of analysts are bullish on the stock, but there are a few analysts who aren’t nearly as confident. There is also an 8.10 percent short position on the stock. It’s difficult to determine the reason for this relatively high short position. The most logical reason is that shorts simply feel the stock is overpriced. They can’t possibly think the business is in trouble. If they think that’s the case, then they’re sadly mistaken.
For those of you who don’t know, Panera Bread is a sandwich and coffee shop with a diversified menu and a welcoming atmosphere. There is also a focus on quality in every aspect of the business. This has led to impressive results. Revenue has increased at an average of 15 percent over the past five years. More recent results have also been impressive. Same-store sales increased 5.1 percent last quarter, and net income increased 34 percent. While these numbers are notable, the expected growth rate going forward is 19 percent.
Panera’s success has led to the competitive advantage of pricing power. The question now is whether this trend can remain intact. We’ll get to that soon, but let’s first take a look at some important numbers…