Buffalo Wild Wings (BWLD), Yum! Brands, Inc. (YUM): This Company Is On a Blazing Run

More game changers ahead besides ale

And as fellow Fool Steve Symington discussed, each table had an advert for its new Game Changer ale available on tap, created in connection with craft brewer Redhook Brewery.

At the Oppenheimer Consumer Conference in June, the company presented its aim to almost “B-dub”ble the number of restaurants to 1,700 in North America and begin international franchising in earnest. It has locations in Malaysia, the Philippines, and Vietnam in negotiation and openings in Saudi Arabia, Riyadh, and three Mexican cities.

Last year, the company began a concerted effort to advertise nationally on TV, radio, and the internet and it also sponsored all NCAA championships. National advertising is still only 3% of sales. The company has inked a deal with DIRECTV (NASDAQ:DTV) to make sure it has all types of sports available to air on its screens.

On its last earnings call, CEO Smith said that another innovation would be tabletop tablets in the restaurants for at table gaming (not gambling), and eventually feature music and ordering capabilities. This was not available at the one I visited, but Smith expected them to be in 100 locations by year-end.

As mentioned before, chicken commodity costs rose 30% over the year ago period, but the company noted a downward trend for the first two months of Q2, which it will report on July 30. On the last call, chicken costs were expected to come down to $1.75/lb., and possibly as low as $1.50/lb.

Competitors at the table

The company’s most direct competition is listed as Hooters of America, not exactly family-friendly, and other privately held chains. Yum! Brands, Inc. (NYSE:YUM) could be considered a competitor, but it doesn’t serve liquor at its KFC restaurants nor offer TV screens for sports viewing.

Yum! Brands, Inc. (NYSE:YUM) has fifteen times the market cap of Buffalo Wild Wings (NASDAQ:BWLD)’s $1.88 billion. Yum! Brands, Inc. (NYSE:YUM) has a 1.90% yield and a lower trailing P/E of 23.53 to Buffalo Wild Wings (NASDAQ:BWLD)’s 33.90. Yum! Brands, Inc. (NYSE:YUM)’s PEG at 2.09 is higher than B-Dub’s 1.53 as well.

Yum! Brands, Inc. (NYSE:YUM) also is a global fast food story known for its extraordinary success in China with over 4,000 restaurants. This week, the China story again worsened with China Central TV reporting Chinese KFC’s ice was unsanitary, this coming on the heels of several quarters of lost sales after a Chinese chicken illegal drug scandal.

Another up-and-coming competitor is BJ’s Restaurants, Inc. (NASDAQ:BJRI), a smaller chain with only 134 restaurants in 15 states. Its concept is casual dining with burgers, sandwiches, pasta, pizza, and 19 BJ’s Restaurants, Inc. (NASDAQ:BJRI)’s craft beers and ales without Buffalo Wild Wings (NASDAQ:BWLD)’s sports kicker. Most of its locations are centered in the West and Southwest, as well as Florida, and three states in the Midwest.

Like Buffalo Wild Wings, it has a market cap under $2 billion. It has a trailing P/E of 34.38 and its short interest is higher as well at 14.90%. Buffalo Wild Wings still elicits a 12.50% short interest, which is decreasing. I find it hard to understand as the company has a low corporate governance risk score of 2 and has less headline risk than say, Yum! Brands, Inc. (NYSE:YUM) with its Chinese PR troubles.

If Buffalo Wild Wings would offer a dividend, it would be a nearly perfect stock. Analysts see 18.08% five-year EPS growth which is slightly above the company’s own ambitions.The company has attracted several institutions, which hold over 5% stakes like FMR LLC, Wellington Management, The Vanguard Group, and Fidelity Growth Company Fund, which holds the largest institutional stake at 8.26%.

The Foolish takeaway

I expect the Q3 and Q4 reports to reflect the success of these initiatives: the Game Changer ale, snack portions, and lower chicken costs. All the shareholders want B-Dub to do is what Blazing Saddles villain Hedley Lamarr exclaimed, “Go do that voodoo that you do so well!”

The article This Company Is On a Blazing Run originally appeared on Fool.com.

AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends BJ’s Restaurants and Buffalo Wild Wings. The Motley Fool owns shares of BJ’s Restaurants and Buffalo Wild Wings. AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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