This Year's Best-Performing Restaurant Stock Will Surprise You
You might not even think of it as a restaurant.
While some national restaurant chains have suffered lately from plummeting stocks—like a certain E. coli-plagued Mexican chain—one business is surging. Dave and Buster's Entertainment, known for its "Eat, Drink, Play, Watch Sports" slogan, dominated the market last year, and investors are definitely paying attention.
According to NASDAQ reports, the arcade/bar/restaurant has become the best-performing restaurant stock in America. Over the past 52 weeks, Dave and Buster's price has jumped up 38 percent. Though the company's growth has been slower than some—it currently has 84 locations and aims to grow by 9 or 10 restaurants this year—its financial success has given the chain new monetary muscle.
This contrasts Chipotle, which has seen its stock price drop sharply despite adding more than 200 locations per year to its 2,000 restaurant empire. The fast-casual burrito chain, which was once one of the hottest restaurant commodities on Wall Street, saw its stock drop 31 percent over the last year, likely as a result of a possible E. coli outbreak in its stores.
Dave and Buster's makes a lot on food and booze (74 percent profitability, which is extremely high for any restaurant). But it's not the strongest earner; that would be gameplay, at 88 percent profitability. This combination of food, booze and games has turned the chain into an unstoppable force, which has all but squashed its competitors profit margins.
Since reporting on its first-quarter earnings at the beginning of June, the chain's stock price went up 10 percent in one day, showing that investors aren't playing games when it comes to profitability.
Another big Wall Street winner this year? McDonald's, whose popular all-day breakfast promo helped the chain's stock rise 30 percent this year. Maybe these chains could learn something from one another: McDonald's needs to introduce video games, and D&B's should consider serving breakfast at night.