Billionaire Ken Griffin’s Citadel Owns 5% of Buffalo Wild Wings

Buffalo Wild Wings is not alone as a high P/E restaurant stock: other growth plays in the industry include Chipotle Mexican Grill, Inc. (NYSE:CMG), Starbucks Corporation (NASDAQ:SBUX), Panera Bread Co (NASDAQ:PNRA), and Dunkin Brands Group Inc (NASDAQ:DNKN). Of these four, Panera is the only one whose trailing earnings multiple is less than 30, at 28. Yet of these four Chipotle is the only one with short interest close to that of Buffalo Wild Wings, and even there the burrito chain- which trades at 38 times trailing earnings and only grew net income by 7% last quarter compared to the fourth quarter of 2011- has only 15% of its outstanding shares short. Starbucks’s recent growth rates are also lower than those at Buffalo Wild Wings, despite the premium in terms of trailing earnings, and Dunkin’s revenue is actually down (though that may be due to franchising or other corporate activity). Panera does have a good growth story going for it, the only one of these peers with both sales and net income growth of 15% or higher in its most recent quarter compared to the same period in the previous year. All five of these stocks made our list of the ten most popular restaurant stocks among hedge funds for the fourth quarter of 2012, with Buffalo Wild Wings at #10 (see more restaurant stocks hedge funds love).

We aren’t particularly excited about Buffalo Wild Wings’ valuation or its performance in comparison to expectations, but it actually seems to be well in line with many other growing restaurants, and possibly a better buy than Starbucks or Chipotle in particular. While it might not be the best long side of a pair trade it certainly seems that Buffalo Wild Wings is overrated as a short candidate.

Disclosure: I own no shares of any stocks mentioned in this article.