Buffalo Wild Wings (BWLD), Mead Johnson Nutrition (MJN): Friday’s Top Upgrades (and Downgrades)

True, Buffalo Wild Wings (NASDAQ:BWLD) is also growing faster than Mead Johnson Nutrition (NYSE:MJN), with most analysts agreeing 18% annual growth is achievable. On the other hand, B-Dub doesn’t pay a dividend like Mead Johnson does. And in complete contrast to Mead Johnson’s superb, better-than-reported-earnings free cash flow number, B-Dub is actually burning cash. Free cash flow at Buffalo Wild ran to more than negative $10 million over the past 12 months.

As a result, I see little reason to own the stock based on its P/E ratio — and no reason whatsoever to buy Buffalo Wild Wings (NASDAQ:BWLD), based on its inability to produce real cash profits.

Abercrombie & Fitch Co. (NYSE:ANF) & Rich?
Now the good news today is that after all this bad news, we finally get to end on a bright note: with Standpoint Research’s upgrade of Abercrombie & Fitch Co. (NYSE:ANF). At last report, Abercrombie & Fitch Co. (NYSE:ANF) was doing about $4.4 billion in annual sales, earning a 5.7% net profit margin on those sales, and earning a bit more than $3 a share. According to Standpoint, however, the company’s on a good growth track that could see it grow sales by 25%, improve its net margin by 14% (to 6.5%), and result in a 62% boost in per-share profits by 2015-2016.

Standpoint sees Abercrombie & Fitch Co. (NYSE:ANF) earning $5 a share at some point within the next couple-to-three years, which would put the stock at a 10 P/E ratio at today’s share price. But in fact, you don’t even have to look out two to three years to see that this stock is already cheap today.

Abercrombie & Fitch Co. (NYSE:ANF) shares cost roughly 16 times earnings right now, yet it is expected to grow earnings at better than 16% per year over the next five years. That’s a better-than-1.0 PEG ratio right there. Plus, the company generates 22% more free cash flow than it gets to report as GAAP profit. Plus, it’s got nearly $350 million more cash than debt on its balance sheet. Plus, it pays its shareholders a 1.8% dividend yield.

That’s three great reasons to think the stock is cheap enough to buy. With numbers like these, A&F shouldn’t even need an upgrade to do well. (But it does deserve it.)

Fool contributor Rich Smith likes shares of Abercrombie & Fitch Co (NYSE:ANF). so much, he bought them himself. Also, The Motley Fool recommends Buffalo Wild Wings, and The Motley Fool owns shares of Buffalo Wild Wings.