These restaurant companies are expected to -2-

A company's gross margin is its net sales, less the cost of goods or services sold, divided by sales. Net sales are sales minus returns and discounts, such as coupons. The cost of goods or services sold includes the actual costs of making the items or providing the services. Gross margin is a useful measurement of pricing power, and it is always good for investors to see a combination of an expanding gross margin and increasing sales.A company's operating margin incorporates more overhead and other expenses that aren't directly related to the production of goods and services. It can be summed up as earnings before interest and taxes, divided by sales.

For the 10 companies on the list above, both of those margins improved, except for those of Kara Sushi USA Inc. (KRUS), Cava Group Inc. (CAVA) and McDonald's.

Expected sales-growth rates

Going back to our larger group of 27 U.S.-listed restaurant companies covered by at least five analysts polled by FactSet, consensus sales and EPS estimates are available through 2026 for 24 of them. We used calendar-year estimates as adjusted by FactSet, as some companies' fiscal years don't match the calendar.

Here are the 10 for which analysts expect to see the highest sales CAGR from 2024 through 2026:

   Company                             Ticker   Two-year estimated sales CAGR through 2026  Two-year estimated EPS CAGR through 2026  Market cap ($mil) 
   Cava Group Inc.                      CAVA                                         20.3%                                     35.0%             $9,697 
   Sweetgreen Inc. Class A               SG                                          17.2%                                       N/A             $3,245 
   Wingstop Inc.                        WING                                         15.7%                                     22.8%            $11,272 
   First Watch Restaurant Group Inc.    FWRG                                         14.7%                                     28.9%             $1,098 
   Shake Shack Inc. Class A             SHAK                                         14.3%                                     32.0%             $3,654 
   Portillo's Inc. Class A              PTLO                                         13.4%                                     35.4%               $617 
   Chipotle Mexican Grill Inc.          CMG                                          13.4%                                     19.2%            $87,043 
   Chuy's Holdings Inc.                 CHUY                                          8.4%                                      5.9%               $451 
   Starbucks Corp.                      SBUX                                          8.4%                                     13.2%            $92,236 
   Texas Roadhouse Inc.                 TXRH                                          8.3%                                     13.5%            $11,216 
                                                                                                                                        Source: FactSet 

For Sweetgreen Inc. (SG), the EPS CAGR is marked "N/A" because the company is expected to continue posting annual net losses through 2026 at least.

You can click the tickers for more data about each company, including news coverage, financials, estimates, ratings and price targets.

Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page.

Cava Group Inc. (CAVA) tops the list for expected sales growth from 2024 through 2026, while Wingstop, our "winner" this earnings season, ranks third.

It is interesting to see Starbucks Corp. (SBUX) on the list of expected rapid growers, considering what a dismal set of quarterly numbers it reported on April 30.

Analysts' favorite U.S. restaurant stocks

For a final screen, let's look at analysts' ratings and consensus price targets. Among U.S.-listed restaurant companies covered by at least five analysts polled by FactSet, 12 have majority buy or equivalent ratings. Here they are, sorted by 12-month upside implied by the consensus price targets:

   Company                             Ticker   Share  buy ratings  June 7 price  Consensus price target  Implied 12-month upside potential 
   Portillo's Inc. Class A              PTLO                   80%        $10.02                  $16.67                                66% 
   First Watch Restaurant Group Inc.    FWRG                   78%        $18.18                  $26.33                                45% 
   Aramark                              ARMK                   73%        $33.25                  $35.60                                 7% 
   Sweetgreen Inc. Class A               SG                    67%        $32.31                  $31.38                                -3% 
   McDonald's Corp.                     MCD                    65%       $256.21                 $311.13                                21% 
   Darden Restaurants Inc.              DRI                    63%       $148.54                 $177.91                                20% 
   Chipotle Mexican Grill Inc.          CMG                    63%     $3,169.02               $3,280.92                                 4% 
   Red Robin Gourmet Burgers Inc.       RRGB                   60%         $8.44                  $15.63                                85% 
   Dine Brands Global Inc.              DIN                    60%        $37.72                  $54.86                                45% 
   Domino's Pizza Inc.                  DPZ                    57%       $513.55                 $546.36                                 6% 
   BJ's Restaurants Inc.                BJRI                   56%        $34.13                  $39.56                                16% 
   Papa John's International Inc.       PZZA                   55%        $47.00                  $67.81                                44% 
                                                                                                                            Source: FactSet 

-Philip van Doorn

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06-10-24 1300ET

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