The fast casual dining sector has been on fire this year basically picking up where it has been ever since the March 2009 bottom. The three leading stocks of Buffalo Wild Wings (BWLD), Chipotle Mexican Grill (CMG), and Panera Bread (PNRA) have had virtually no pause in the rally for the last three years. Not even the market downturns in 2010 and 2011 could pull them down.
Though continuing to grow fast all these stocks face steep valuations and at some point the wall of large numbers will hit them. Chipotle already has a market cap over $11B and annual sales above $2.2B.
As an example, Darden Restaurants (DRI) with its main restaurants of Olive Garden and Red Lobster has succumbed to much lower multiples even though operating several successful chains. The company will approach $8B in fiscal 2012 revenue, but only has a market cap of $6.4B.
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