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A Glance at Fast Casual Restaurants’ 4Q15 Performances

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Equity screener

Throughout this series, we’ll screen eight fast casual restaurants in order to aid the investment decision-making process. We’ll be covering key fundamental parameters that are critical in analyzing restaurant companies.

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Industry classification

Based on the type of service they provide, restaurants are classified into six categories: fast food, casual dining, fast casual, family dining, pizza, and café restaurants. In this series, we’ll focus on fast casual restaurants.

Fast casual restaurants

Fast casual restaurants are the amalgamation of fast food and casual restaurants. Fast casual restaurants provide limited table service, and the menu will be limited and moderately priced.

In this series, we’ll be looking at the 4Q15 performances and key financial indicators of Chipotle Mexican Grill (CMG), Panera Bread (PNRA), Shake Shack (SHAK), Habit Grill (HABT), Fiesta Restaurant Group (FRGI), Noodles & Company (NDLS), Zoe’s Kitchen (ZOES), and Potbelly (PBPB).

If you’d like to read an analysis of fast food and pizza restaurants, you can do so in the series How Did Fast Food and Pizza Companies Fare in 4Q15?

4Q15 stock performance

4Q15 was a tough quarter for fast casual restaurants. From the beginning of 4Q15 until March 18, 2016, only three of the eight companies listed above yielded positive returns. Potbelly delivered a return of 22%, while Panera Bread and Zoe’s Kitchen returned 8.8% and 0.5%, respectively.

Companies whose share prices suffered were Chipotle Mexican Grill and Shake Shack. CMG’s share price fell by over 37.1% from the beginning of 4Q15 onward due to a major food safety issue that hit the company in October 2015.

SHAK fell by over 26.1% as investors grew skeptical about its growth prospects. Fiesta Restaurant Group, Habit Grill, and Noodles & Company fell by 17.2%, 13.8%, and 5.6%, respectively.

During the same period, the broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY) rose by over 4.3%. We’ll look at the factors that caused the majority of fast casual stocks to underperform throughout most of the first quarter.

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