3 Top Performing Restaurant Stocks

Although the universe of publicly traded restaurant stocks is fairly small, with only 51 companies trading on the major exchanges, from an investment perspective there are some advantages to this sector. First, the industry is relatively simply to understand compared to others, such as cloud computing, networking, or even enterprise software. As an investor, this can be a major advantage as the better you can understand the stocks that you own, the more likely it is that you will make informed decisions. Also, this relative simplicity of the business translates into a company's financial statements. Whereas many industries generate opaque, incredibly complex financial statements, such as banking for example, analyzing a restaurant company's financials is fairly straightforward. Another advantage to investing in this sector is that it has a very strong historical track record and the industry certainly is not going away anytime soon. Furthermore, the restaurant segment has produced a long list of terrific stocks that have performed over the long-term. Examples include McDonald's MCD, Chipotle CMG, Panera Bread PNRA, Yum! Brands YUM, and Buffalo Wild Wings BWLD, to name a few. While the sector has not produced a great many huge winners in 2014, there are a few stocks that have significantly outperformed the market so far this year. Below, Benzinga takes a closer look at the three top performing restaurant names in 2014. Famous Dave's of America DAVE - This small-cap company traces its history back to the first Famous Dave's restaurant which was opened in Minneapolis in 1995. Today, the company has over 200 locations scattered throughout the United States. The Famous Dave's concept is based on the great American tradition of barbecue along with sides such as corn muffins and baked beans. The company has also expanded into retail with its Famous Dave's line of barbecue sauces, rubs, and seasonings. In recent years, the formula has rewarded investors handsomely. Over the last 5 years, the stock has climbed around 445 percent, including a 67 percent gain in 2014. The bull market has contributed significantly to the rise in the stock, as the company's fundamentals are mediocre at best. Both revenue and net income have been stagnant in recent years, but analysts see a brighter future on the horizon. Sales are expected to rise around 8 percent next year and earnings per share are projected to jump from $0.97 in fiscal 2014 to $1.32. If the company can meet these estimates, there is a good chance that shareholders will continue to be rewarded for holding this name in their portfolios. Jack in the Box JACK - This company is both the most well-known and largest on a market-cap basis of the top performing restaurant stocks of 2014. Jack in the Box is an aggressive marketer and a formidable competitor to company's such as McDonald's, Yum! Brands, Burger King BKW and Wendy's WEN in the lucrative fast-food segment. In addition to its Jack in the Box concept, the company also owns and operates Qdoba Mexican Grill, which is a competitor to Chipotle. At the beginning of the year, the Jack in the Box system was comprised of 2,251 restaurants in 21 states, including 465 corporate operated stores and 1,786 franchise operated locations. The Qdoba system included 615 restaurants in 46 states and Canada with 296 being company operated. At current levels, the company sports a market-cap of just under $2.50 billion and the shares yield 1.30 percent. Like many of its counterparts, the bull market has been very good to Jack in the Box shareholders. Over the last 5 years, the stock has risen around 158 percent with almost all of the gains coming since the beginning of 2012. Year-to-date, shares have climbed better than 21 percent and in recent days JACK was sitting near a new all-time high. The gains have come despite persistent declines in revenue, margins and net income. Nevertheless, analysts are projecting that earnings per share will jump from $2.36 in fiscal 2014 to $2.72 in 2015 and revenue is expected to rise slightly to $1.49 billion next year. Although Jack in the Box's financial performance may leave a lot to be desired, shareholders are unlikely to complain too much in light of the stock's consistent gains in recent years. Zoe's Kitchen ZOES - The final name to make this list is a small-cap restaurant chain headquartered in Plano, Texas. This stock is probably unfamiliar to most investors as Zoe's only completed its IPO in April. Nevertheless, the company's first couple of months of trading have been lucrative for investors, with the stock more than doubling from its $15 offering price. The company raised $87.5 million after pricing its IPO above the initial expected range of $11 to $13. Zoe's operates in the fast casual space with a menu focused on Medirerranean food such as pitas, hummus, kebabs and rice pilaf. The company currently only has 111 locations, but is planning to double its store count over the next four years. Given investors' high growth expectations for Zoe's, the stock is hardly cheap on a valuation basis. At its IPO price, the stock was trading at 25 times its fiscal 2013 EBITDA and now that shares are trading at roughly $32 apiece, that multiple has risen substantially. After the big jump, ZOES is closing in on Wall Street's mean price target of $32.80, which makes it likely that analysts may either downgrade the name or raise their targets in the coming weeks. The five analysts that currently cover the name are projecting that revenue will rise more than 24 percent in 2015 to $208.35 million and that earnings per share will jump from $0.01 to $0.07. Although valuation may be getting stretched, this is certainly a name to watch as there is always the possibility that Zoe's could become the next Chipotle or Buffalo Wild Wings.