Wingstop (WING) Up 63% YTD: How Investors Should Play Now
Wingstop Inc. WING has shown resilience amid market fluctuations, delivering significant returns to investors. The stock has notably outperformed its industry peers and the broader S&P 500 Index.
This success is driven by the company's expansion efforts, strong comparable store sales growth and an effective supply chain strategy.
Wingstop’s stock has surged 63.1% year to date (YTD), in stark contrast to the industry's 7.1% decline. As of Jul 4, the stock closed at $418.49, below its 52-week high of $431.03 but significantly higher than its 52-week low of $150.08.
Stock Performance
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Growth Drivers
The company continues to benefit from robust comps growth. In first-quarter 2024, WING’s comps increased 21.6% year over year, primarily driven by an increase in transactions. This reflects the strong health of the brand and the effectiveness of its strategy. The company also increased its comps guidance for 2024 from mid-single-digits to low-double-digit same-store sales growth.
Wingstop is experiencing remarkable success in its newest markets, including Canada, Puerto Rico and Korea, where the company is applying its successful U.K. strategy to achieve record-breaking sales in weeks. The rapid scaling of brand awareness in these regions mirrors the achievements seen in the U.K.
This robust global growth and strong development pipeline have bolstered Wingstop's confidence to revise its 2024 outlook, projecting an increase of 275 to 295 net new restaurants. This expected growth rate significantly exceeds the company’s three to five-year target of over 10% annual unit growth. Wingstop's successful business model and strategic execution continue to drive the company toward its goal of becoming a top 10 global restaurant brand.
Wingstop is making significant strides in its supply chain strategy, aiming to create predictability and reduce volatility in its core commodity—bone and wings. By collaborating closely with strategic supplier partners, Wingstop has successfully shifted the majority of its purchasing away from the spot market. With this move, WING ensures more stable and predictable food costs for its brand partners. This approach not only enhances operational efficiency but also supports the company's growth and development initiatives, acting as a catalyst for continued expansion.
Estimate Movement
Estimates for WING’s 2024 earnings have moved up from $3.39 to $3.40 in the past 60 days. The company’s earnings and sales in 2024 are expected to witness a growth of 37.1% and 27.9%, respectively, year over year.
Valuation
WING’S forward 12-month price-to-earnings ratio stands at 110.62, which is significantly higher than the industry’s ratio of 22.14 and the S&P 500's ratio of 21.50. This suggests that investors may be paying a high price relative to the company's expected earnings growth. Wingstop is also trading currently at a premium compared to other industry players like Darden Restaurants, Inc. DRI, Domino's Pizza, Inc. DPZ and Restaurant Brands International Inc. QSR.
Conclusion
Despite the company's high valuation, its fundamentals remain strong. Investors might consider adding this Zacks Rank #2 (Buy) stock to their portfolios, as Wingstop is poised to benefit from robust expansion efforts and various sales-building initiatives. Additionally, WING is trading above its 50-day moving average, showcasing strong upward momentum and price stability. This technical strength highlights positive market perception and confidence in the company's financial health and prospects.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Domino's Pizza Inc (DPZ) : Free Stock Analysis Report
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Wingstop Inc. (WING) : Free Stock Analysis Report
