Zoës Kitchen: We Continue To View The Valuation As Acceptable, Says William Blair


In a research report published today, William Blair analyst Sharon Zackfia maintained an Outperform rating on Zoe’s Kitchen (NYSE:ZOES), following the company’s strong second-quarter results, posting EPS of $0.04 that were a penny above Zackfia and consensus estimates.

Zackfia noted, “Reflecting the upside in the second quarter, we are raising our2014 EPS estimate by the penny, to $0.03 (versus consensus of $0.02), and our 2015 estimate by $0.03, to $0.10 (versus consensus of $0.07). Our EPS estimates are predicated on comp gains of roughly 6% in 2014 and 4% in 2015, with each incremental comp point adding roughly $0.015 to $0.020 to annual EPS.”

The analyst added, “While Zoës stock is priced at a premium valuation of 29 times our 2015 EBITDA estimate, we continue to view the valuation as acceptable givenour expectation that Zoës will be one of the fastest-growing publicly traded restaurant concepts with the long-term potential to grow the unit base more than 13-fold (versus a potential sixfold increase for its closestpeer in the fast-casual subsegment of the industry). As a result, we expect the rapid cadence of earnings growth and likely upside to expectations will more than offset any potential downward gravitation in valuation metrics over time.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Sharon Zackfia has a total average return of 20.6% and a 68.4% success rate. Zackfia is ranked #443 out of 3266 analysts.

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