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What Do Analysts Recommend for Fast Casual Restaurants?

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Mar. 25 2016, Updated 10:06 a.m. ET

Analysts’ recommendations

Share prices generally move in tandem with analysts’ recommendations. As analysts raise their next-12-month target prices, stocks’ share prices may also increase, and vice versa.

In this article, we’ll discuss analysts’ revised estimates and recommendations for fast casual companies following their 4Q15 results.

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Peer comparison

In the above chart, we can see that Fiesta Restaurant Group (FRGI) is the most favored stock, with 100% “buy” recommendations. Habit Grill (HABT) is the next most favored, with 90% “buy” recommendations and 10% “hold” recommendations.

Panera Bread (PNRA) has received 54% “buy” and 46% “hold” recommendations. PNRA and Brinker International (EAT) form 0.3% of the holdings of the iShares Russell Mid-Cap Growth ETF (IWP).

Shake Shack (SHAK) and Potbelly (PBPB) are the least favored stocks, with 20% of analysts recommending “sells.” Noodles & Company (NDLS) and Chipotle Mexican Grill (CMG) have also received 14% and 12% “sell” recommendations, while 10% of analysts are recommending “sells” on Zoe’s Kitchen (ZOES).

Return potential

Analysts are forecasting that Habit Grill will reach $30 over the next 12 months. This represents a return potential of 58%. Fiesta Restaurant Group follows, with a 38% return potential. Shake Shack has a 13% return potential.

Potbelly, Chipotle Mexican Grill, and Panera Bread are expected to return 8%, 7%, and 6%, respectively, over the next 12 months. However, analysts see Noodles & Company and Zoe’s Kitchen as overpriced and expect them to correct by 4% and 8%, respectively, over the next 12 months.

A share price that is lower than a stock’s target price doesn’t mean that the stock is an automatic “buy.” Before investing, investors should carefully analyze the various metrics that we’ve discussed in this series.

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