Over the last 20 years, Chipotle’s stock has seen phenomenal growth, with a total return of 7,000% since its IPO. However, the stock is now considered expensive with a P/E ratio of 67, making it less appealing for growth compared to previous years. Investors looking for the next big restaurant stock should consider smaller companies that have the potential to replicate Chipotle’s success. One such candidate is Portillo’s, a Chicago-centric restaurant concept that has impressive restaurant-level economics and plans for expansion.
Portillo’s has an average unit volume (AUV) of $9.1 million, comparable to top restaurant chains like Chick-fil-A, despite being less well-known. With plans to expand into new states and grow its unit count by at least 10% per year, Portillo’s management believes it has a significant growth potential. The company aims to increase its unit count tenfold before reaching market saturation, which could result in substantial revenue and earnings growth in the long term.
Despite its growth plans, Portillo’s remains highly profitable, with positive operating margins and a strong focus on improving profitability. As the company scales up its locations, operating margins are expected to increase, leading to higher earnings potential for the restaurant concept. With a market cap of $890 million and an enterprise value of approximately $1.5 billion, Portillo’s stock appears relatively cheap given its growth prospects.
Investors who believe in Portillo’s ability to continue growing its unit count and improve its margins may find the stock attractive at its current valuation. With the potential to achieve $100 million in earnings in the future, Portillo’s could offer investors significant returns over the long term. The restaurant concept’s impressive unit economics and growth trajectory make it a compelling investment opportunity for those looking for the next Chipotle in the restaurant industry.
While Portillo’s may not be mentioned as one of the top 10 stocks identified by The Motley Fool Stock Advisor analysts, its growth potential and strong financial performance make it a stock worth considering for investors. With a clear path to expansion and profitability, Portillo’s could be the next restaurant stock to deliver monster returns for shareholders. Investors looking for a growth opportunity in the restaurant industry may want to explore the potential of Portillo’s and consider adding it to their investment portfolio for long-term growth.
