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Panera Bread Co (PNRA): Is This Stock Baked?

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Panera Bread Co (NASDAQ:PNRA) is a high-quality company that has been a consistent winner over the years. However, past results don’t guarantee future success. And even if Panera is a good long-term investment, that doesn’t mean it’s the best option compared to its peers.

Expansion and costs

Between company-owned and franchised units, Panera Bread Co (NASDAQ:PNRA) has its name on 1,652 units throughout the United States and Canada. While the majority of these units are strategically placed in high traffic areas, there is still room for expansion. Panera is planning on opening 115 to 125 system-wide units by the end of the year. This, of course, will likely lead to top-line growth.

Panera Bread Co (NASDAQ:PNRA)There will be costs associated with this expansion, but Panera Bread Co (NASDAQ:PNRA) has consistently delivered big profits, so these investments look to be worthwhile. Additionally, Panera owns a stellar balance sheet with no long-term debt. Panera might not pay a dividend, but this has allowed it to use extra capital for growth.

Atmosphere

Panera Bread Co (NASDAQ:PNRA)’s success can be attributed to its varied menu, quality (and antibiotic-free) food, and customer loyalty. But some say atmosphere is its biggest point of difference.

If you have ever been a restaurant, then you must have seen people sitting at a table with a laptop, and some have been there for hours. These might be students studying for an exam, a professional preparing a presentation, or someone just getting away from home to communicate with friends via social networking sites.

Whatever the case may be, the atmosphere is comfy and cozy. And when people spend hours in one location, they get hungry and thirsty. Therefore, instead of a customer coming in and ordering once, eating, and then leaving, many Panera Bread Co (NASDAQ:PNRA) customers continue to make purchases during their visit.

This is a very similar concept to Starbucks Corporation (NASDAQ:SBUX). And it should come as no surprise that Starbucks has also been wildly successful through the years. More on Starbucks soon.

Company culture

According to Glassdoor.com, where employees anonymously review and rate their employers, Panera Bread Co (NASDAQ:PNRA) has received a rating of 2.9 of 5. While this isn’t very good, the biggest complaint is long hours, which should be expected. If you read the reviews, there are actually more positives than negatives.

  • Employees see Panera Bread Co (NASDAQ:PNRA) as highly innovative and customer-friendly.
  • Employees also state that stores are always busy and never understaffed. I know, sort of a contradiction.
  • Employees have even stated that managers are friendly and efficient, which is rare.

Aside from long hours, the only other negative that stands out is overpriced food. This is a positive as long as customers are willing to pay the premium. The question is whether or not this trend can continue when the consumer inevitably weakens. Then again, perhaps we already know the answer.

The consumer hasn’t exactly been strong over the past several years, yet Panera Bread Co (NASDAQ:PNRA) has continued to show top and bottom line growth. Another important point is that Panera was essentially unfazed by The Great Recession. At this point, it might seem as though an investment in Panera would be a no-brainer, but there is better.

Other options

Chipotle Mexican Grill, Inc. (NYSE:CMG) can certainly be classified as great, considering its 176% ascent over the past 3 years. Chipotle’s organic food approach, combined with increased demand for Mexican food throughout the U.S., has helped it to impressive gains. Chipotle has seen superb revenue and earnings growth, and margins have been expanding. In addition to good-tasting Mexican food, Chipotle offers a comfortable atmosphere, a customizable menu, and affordability.

The only real concern for Chipotle Mexican Grill, Inc. (NYSE:CMG) is that it’s growing too fast. Apparently, many people feel this way considering its 11.60% short position. Chipotle is trading at 43 times earnings, making it expensive.

There is little doubt that Chipotle Mexican Grill, Inc. (NYSE:CMG) will be around for a long time and that it’s likely to increase market share. The only knock is the price of the stock.

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