Intel Corporation (INTC), Coach, Inc. (COH): What to Get on Your Watchlist

Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)
Don’t worry short-sellers, I haven’t forgotten about you, either! Following its second-quarter results Thursday night, shares of causal burger-focused dining chain Red Robin has been soaring. The reason behind the move is that Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) delivered $0.77 in EPS versus expectations of $0.66 on 4.3% growth in comparable-store sales. But, with shares now valued in excess of 25 times earnings, I’m ready to send this stock back to the kitchen as being overdone.

Dissecting Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)’s report a bit further, there were some disconcerting figures which stuck out. To begin with, while it’s good to see Red Robin being able to pass along price increases to its customers, it’s equally scary to see that its guest count decreased by 0.7%. Some of that could have to do with decreased marketing, but it could also easily be a reflection of tighter consumer spending, and the fact that its higher prices are driving customers elsewhere.

Another factor worth noting is that full-year comparable-store sales are only expecting to increase by 3%, meaning the second-half of the year, which many businesses have been exclaiming would be better than the first, should weaken for Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). It might be worth mentioning, as well, that revenue for the quarter slightly missed Wall Street’s expectations, but by a truly marginal amount (less than 1%).

Valuation is the final factor that would make me get up and leave. With the company valued at a hefty 25 times forward earnings, and demonstrating an organic growth rate of just 3%, I’m extremely worried what might happen when food costs again begin to tick higher. The valuation here just doesn’t make sense, and this could be setting up to be an excellent short-sale candidate.

The article 3 Stocks to Get on Your Watchlist originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of, and recommends, Coach and Intel. It also recommends Red Robin Gourmet Burgers. 

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