Panera Bread Co (PNRA): A Restaurant Stock to Sink Your Teeth Into

The first time you visit a restaurant owned by Panera Bread Co (NASDAQ:PNRA) you are immediately a repeat customer. Its selection of offerings, highlighted by the inclusion of freshly-baked breads, is becoming renowned for being both appetizing and healthy.

As the company’s expansion continues at even greater profitability and sales per store, the stock remains a worthwhile portfolio holding for most accounts. No longer just a stop for lunch after a strenuous gym workout, the franchise has sold me, and likely many others, as part of a daily routine. This gain in acceptance appears to have been fueled solely by the quality of its offerings and the store atmosphere.

Along with food lovers, those looking for a wide selection of coffees and other beverages are the ones who make their way to Panera Bread Co (NASDAQ:PNRA)locations on a regular basis. Comparable-store sales, to be precise, advanced 3.3% year over year in the March quarter. All of these factors, with a touch of store-base expansion (the unit count is climbing 7% annually), are a recipe for strong profit growth prospects.

In fact, thanks also to margin expansion, share net could well climb upwards of 20% this year. Given this estimate, the stock is trading at a P/E of nearly 23x. The company’s growth outlook and clean balance sheet add to its value when considering free cash flow.

Contrasting Panera with a retailer that has many more years under its belt, Bed Bath & Beyond Inc. (NASDAQ:BBBY), there are some similarities to be found. Although BBBY is a big box seller of home goods, it also fills a niche providing something between a department store and a specialty retailer. The company also operates several more specialty type concept stores, as well as 264 or so World Market units, purchased in June 2012.

Bed Bath & Beyond is expanding at a more modest pace than Panera Bread Co (NASDAQ:PNRA) at this stage, with plans to boost the store count about 3% in 2013. Still, like Panera, comps are rising steadily in the 2% to 3% range, illustrating the staying power of its operating model. This is probably due to the assortment of bed and bath textiles from top designers, as well as the “Beyond” categories, including kitchen and furniture items etc.

BBBY shares have bounced back of late and good holding for long-term portfolios. Despite this, the stock is trading at a lower P/E ratio than its competitors and has a lower beta score, meaning less volatility (see Financial Ratios).