These 3 Smallcap Restaurant Stocks Have a Secret Ingredient

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You probably have a special dish that you order everytime you go to your favorite restaurant. Maybe the hostess or owner even greats you by name (the way my daughter is now greeted at Chipotle Mexican Grill, Inc. (NYSE: CMG)). These three small-cap restaurant stocks have been serving up a dish investors can never get enough of…profit!

Wingstop, Inc. (NASDAQ: WING) claims they are not in the wings business but in the flavor business. The flavor business is apparently a great business. Wingstop’s profit margins are over 23%, leading small-cap restaurant stocks.

The challenge will be maintaining those margins while growing. And, Wingstop has plenty of room to grow. The company has around 1,100 restaurants and is only in 9 countries outside of the U.S.

The market has rewarded the company so far this year, with the stock up almost 40% in 2018. At just over $50, this red hot growth stock sports a PE of 69. Management will need to grow into that number in the next few years to maintain the upward momentum.

Sonic Corp. (NASDAQ: SONC) has a little more down to earth PE ratio, coming in at 23.75, but the fast food drive-in chain is providing investors with tasty profits margins of 16.90%.

The company has a PEG ratio of only 1.53 (compared to WING’s 3.53). That’s one of the lowest PEG ratios of any of the top small-cap restaurant stocks. And, that is with the stock up 30% this year alone.

Though a small 1.79%, Sonic pays one of the top dividends in this group as well. For the value it delivers, even after the nice move this year, investors may want to pick up the stock on even slight pullbacks.

If you’re looking to pay a little less for your profits, but you still want those margins over 10% look no further than Bojangles’, Inc.(NASDAQ: BOJA). With profit margins of 12.50%, but a PE of only 17.97, this restaurant stock is priced right.

The stock has pulled back to just over $13.50 after very briefly peaking above $16 earlier this year. Though still up almost 15% YTD, the recent pullback gives investors an opportunity to get in at a much more reasonable price than even a month ago.

The company ran into expansion pains earlier in the year, and it’s CEO, Clifton Rutledge, resigned in early March for personal reasons. Investors may need a little patience as the company gets the expansion in order. But, the reward may be as tasty as the famous Bojangles’ biscuit.

These three small-cap restaurant stocks give you a variety of choices for investing. Their valuations are different, as are their particular stages in their expansion plans. But, each is delivering profit to make a gourmand’s mouth water.

Disclaimer: The author and Spotlight Growth has no positions in any of the stocks mentioned in this article. Nor does either party currently have any relationship, or any other conflicts of interest, with any of the companies mentioned in this article. This content is meant for informational and entertainment purposes only and should not be meant as a recommendation to buy or sell any securities. Please visit a licensed financial representative to determine what investments are right for you.

Article By: Steven Adams

These 3 Smallcap Restaurant Stocks Have a Secret Ingredient

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