Wingstop’s stock price has taken a beating over the past six months, shedding 44.6% of its value and falling to $223 per share. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Following the pullback, is now an opportune time to buy WING? Find out in our full research report, it’s free.
Why Is WING a Good Business?
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ: WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
1. Surging Same-Store Sales Show Increasing Demand
Same-store sales is an industry measure of whether revenue is growing at existing restaurants, and it is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Wingstop has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 19.3%.
2. Operating Margin Reveals a Well-Run Organization
Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Wingstop has been a well-oiled machine over the last two years. It demonstrated elite profitability for a restaurant business, boasting an average operating margin of 25.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
3. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Wingstop has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the restaurant sector, averaging 17.2% over the last two years.
Final Judgment
These are just a few reasons why we're bullish on Wingstop. With the recent decline, the stock trades at 52.2× forward price-to-earnings (or $223 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than Wingstop
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
