Restaurant Chain Portillo's Poised To Attain 10X Unit Count In Next Decade & Expand Nationwide: Analyst

Stephens analyst Joshua Long initiated coverage on Portillo's Inc PTLO with an Overweight rating and a price target of $20. 

The analyst notes that the company generates industry-leading sales volumes early on its growth trajectory, with the potential to attain over 10 times its unit count in the coming decades.

PTLO's new stores are projected to generate a ~25% cash-on-cash return in year three on average unit sales of ~$7.4 million, store cash margin of 22%, and average cash build-out costs of $6.2 million- $6.5 million, writes the analyst. 

Long says that PTLO is in its early growth stages, with ~78 operating units against the target for 920+ locations. 

The new store opening performance has been encouraging and supports the analyst's view about the brand successfully expanding nationwide.

The analyst estimates revenue and adjusted EPS of $678.0 million and $0.29 in FY23 and $765.9 million and $0.44 in FY24.

Long sees same-store sales growth in low-single-digits % and 12%-15% unit growth, driving low-double-digit EBITDA growth in the long term.

Price Action: PTLO shares are trading lower by 2.75% at $14.44 on the last check Friday.