For months, Panera Bread Co (NASDAQ:PNRA) was a darling of growth investors for its soaring share price. Indeed, investors in the specialty restaurant had reason to celebrate: the stock ran up from $160 per share at the beginning of the year to over $190 per share in just a few months.
Unfortunately, as the saying goes, what goes up must come down, and shares of Panera Bread Co (NASDAQ:PNRA) cratered after the company released its second-quarter results. Should investors bail, or is there still reason for optimism?
A strong report on the surface
At first glance, there didn’t seem to be anything wrong in Panera Bread Co (NASDAQ:PNRA)’s report. The company reported 16% higher diluted earnings per share on the back of 11% growth in total revenues. Still, shares were as much as 7% lower on the day of the announcement.
In fact, Panera Bread Co (NASDAQ:PNRA)’s second-quarter results mirrored its first-quarter results, which saw total revenue and diluted EPS rise 13% and 17%, respectively.
Panera Bread Co (NASDAQ:PNRA) isn’t the only specialty eatery whose operating results have faced additional scrutiny in recent quarters.
Fortunately for its investors, the share price has recovered strongly over the past several months, due largely to renewed success in its operations.
Chipotle Mexican Grill, Inc. (NYSE:CMG) recently released strong second-quarter and first-half results. The company’s revenues grew 18% in the first quarter and 16% in the first half, while diluted earnings per share increased 10% and 16% in the second quarter and first six months of the year, respectively.
Industry competitor Starbucks Corporation (NASDAQ:SBUX) isn’t quite an apples-to-apples competitor, selling coffee versus primarily food offerings for Panera and Chipotle Mexican Grill, Inc. (NYSE:CMG), but it is a specialty restaurant and carries a valuation profile close to both companies.
Starbucks Corporation (NASDAQ:SBUX) reported a great quarter of its own. Global same-store sales grew 8%, and when combined with effective cost cuts, profits climbed 25% year over year. Interestingly, U.S. sales showed strength, rising 9% versus the prior year. Clearly, Starbucks Corporation (NASDAQ:SBUX)’ customer base is bucking the trend of broad sales weakness seen in the domestic consumer.
Valuations remain a concern
Of these three stocks, Panera Bread Co (NASDAQ:PNRA) is the cheapest, although that’s not exactly a selling point for the stock. While Chipotle Mexican Grill, Inc. (NYSE:CMG) and Starbucks Corporation (NASDAQ:SBUX) trade for 42 and 33 times trailing earnings, respectively, Panera exchanges hands for a more reasonable 27 times trailing earnings.