Panera Bread Co (PNRA), Starbucks Corporation (SBUX): This Stock Should Continue to Power Higher

Page 1 of 2

Panera Bread Co (NASDAQ:PNRA) operates restaurants/cafes in the U.S. and Canada. Its growth has not only been good, but it has been consistent. Take a look at this multi-year chart below. It doesn't get much cleaner and consistent than this.

In fact, the company has also produced stable and increasing cash flow from operations and Return on Equity (ROE). It's tough for these two metrics to lie, especially when you look at a long-term trend. A company may be able to game a quarter or two to make things look nice, but when cash flow from operations and ROE are this pretty for four years, you know it's the real deal.

Valuation

Panera Bread (PNRA)Panera Bread Co (NASDAQ:PNRA)'s P/E of 31.4 is a bit high. But remember, you generally have to pay some premium for a company that is growing like Panera and is as consistent as it has been. Also keep in mind that Panera has no long-term notes for an investor to worry about. That also is worth paying a small premium.

Dividend

Unfortunately, Panera Bread Co (NASDAQ:PNRA) doesn't give us a dividend. But its growth history and potential are stellar and provide investors a lot of comfort. They are nowhere near saturation in the U.S. and have barely scratched the surface of their market potential in Canada. Someday, they may head overseas, but that is not necessary yet to drive continued growth. The domestic market still provides ample opportunity for Panera Bread Co (NASDAQ:PNRA) to give investors excellent returns.

Alternative #1: Starbucks

If you'd like another alternative, but a similar enough company, then look at Starbucks Corporation (NASDAQ:SBUX). Over the past couple of years, Starbucks has returned to its roots as a reliable growth story after spending a couple years of struggling to grow.

Now, Starbucks is planning an increasingly aggressive expansion overseas to juice its earnings and send the stock price through the roof. In particular, the expansion in Asia is the most interesting given how big a market it is and the fact that Starbucks has generated double-digit comps for eleven straight quarters.

If the solid U.S. results and huge potential in Asia aren't enough, Starbucks Corporation (NASDAQ:SBUX) is also expanding through acquisitions in Teavana, LaBoulange, and Evolution. All of these food and tea products figure to provide additional profits and growth, especially once Starbucks has a chance to apply its business expertise to these relatively young companies.

Valuation

Investing in Starbucks Corporation (NASDAQ:SBUX) doesn't come cheap. It has a ton of potential, but you pay for that with a P/E of 32.3. The good news is that revenue continues to grow at a double-digit clip, all while cash flows from operations continue to rise.

Dividends

There may be nothing better than a stock that not only gives you high-growth potential, but also provides a solid dividend while you wait. The aforementioned 32.3 P/E can be tough to stomach since it prices-in much of Starbucks' potential. However, now that Starbucks Corporation (NASDAQ:SBUX) provides a 1.30% dividend yield, it's a little easier to buy and hold through any ups and downs to get those regular dividend payments.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 30 percentage points in 13 months Learn how!

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!