Has Chuy's Turned Tasty Now That Investors Are Fleeing the Stock?
Chuy's Holdings (NASDAQ: CHUY ) stock launched out of the IPO gate due to the excitement over the potential for the Southwest regional chain to expand nationally. The Austin, Texas-based Tex-Mex chain only operates 48 full-service restaurants and recently expanded into the Carolinas and Ohio.
In the past month, the stock has faced selling pressure after the third-quarter earnings report showed declining margins. However, other successful restaurant chains have had periods of weakness followed by huge returns. Fellow Mexican chain Chipotle Mexican Grill (NYSE: CMG ) and industry leader Darden Restaurants (NYSE: DRI ) share another theme: strong restaurant-level margins while maintaining restaurant growth. Is the recent margin decline a blip for Chuy's due to absorption of all the new restaurant growth or has the company bitten off more than it can chew?
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