August 2, 2022, Wingstop Inc. (NYSE: WING) and Dine Brands Global, Inc. (NYSE:DIN)
Dig into these restaurants as the best stocks to buy now.
In July, the indices had their best monthly performance since 2020. However, they entered August with a whimper. The Dow dropped 46.73 points (-0.14%), the S&P 500 declined -0.28%, and the Nasdaq fell -0.18%. With August historically the worst month for stocks since 1987, buckle up and play defense. Wingstop (NYSE: WING) and Dine Brands Global, Inc. (NYSE:DIN) are the best stocks to buy now.
Why Wingstop and Dine Brands? Food stocks have proven to be solid defensive plays during recessions. We may or may not officially be in one, but numbers don’t lie. The GDP has fallen for two straight quarters.
Wingstop is one of the best stocks to buy now because it offers brand recognition, affordable food, and strong positioning to withstand inflation. In fact, Wingstop is so strongly positioned that its fundamentals were allegedly prepared for inflation for a year. After all, you don’t set a quarterly record for net new store openings in a challenging environment by accident. WING has also nearly doubled since before Memorial Day Weekend and could have another 25+% upside based on countless recent analyst upgrades.
Dine Brands Global, Inc. is also one of the best stocks to buy now. It’s the parent company for Applebee’s and IHOP and is a juggernaut of a company. While its stock hasn’t moved quite as radically as Wingstop’s, it is a unanimous STRONG BUY, according to Tipranks, and has a 24.02% upside. Pay close attention to its earnings call next week, too, as it’s a consistent earnings beater.
We may or may not be in a recession, so play defense with these companies. They’re undeniably the best stocks to buy now.
Wingstop Inc. (NYSE: WING)
This stock has nearly doubled since late May yet still may have a 26.83% upside.
In May, Morgan Stanley named Wingstop one of its 10 most underappreciated post-COVID stocks. At the time, the stock was in a deep correction and going through a brutal sell-off.
That feels like forever ago.
Wingstop’s been on fire. The Company is expanding rapidly, crushing earnings, and providing investors with a stock that’s nearly doubled since before Memorial Day Weekend. There’s no other way to spin it.
As much as Americans love wings, do you know what they love even more? Making money. Wingstop is one of the best stocks to buy now for that reason. The best part? Analysts are upgrading this stock in droves and don’t believe that its bull run is anywhere near over.
Its Latest Earnings Could be a Preview of Future Growth
Wingstop reported Q2 earnings on July 28, 2022. Although revenue was a tad short of analyst estimates at $83.8, it still marked a 13.2% year-over-year increase. Additionally, system-wide sales increased 7.5% to $633.6 million, quarterly net income rose 17.6% year-over-year to $13.3 million, and three-year domestic same-store sales increased 30.7%.
But EPS is what turned heads after coming in at $0.45. This was $0.09 higher than analyst forecasts and 18.42% higher than the same period a year ago.
You can thank Wingstop’s inflation mitigation efforts, a record 67 net new quarterly store openings, strategic expansion with Uber Eats, and positive outlook for the back half of the year for this great earnings report.
Especially when you consider that Wingstop’s earnings are expected to grow by 16.56% in the coming year, its net income is projected to grow 9.5%, and its revenue is forecast to see a 22.3% 5-year CAGR.
Being a “Year Ahead” of Inflation Explains Wingstop’s Outstanding Margins
Wingstop’s aggressive growth initiatives and innovative inflation mitigation strategies are two reasons it’s one of the best stocks to buy now. Wingstop has achieved 18 straight years of positive same-store sales growth and knows precisely how to handle uncertain economic environments.
Through digital initiatives, menu adjustments and packages, strategic partnerships, and innovation, Wingstop positioned itself a year ahead of inflation.
Its outstanding margins seem to add more context as to why and how.
Although Wingstop’s 3.8% dividend yield only has about a four-year track record of increases, consider this. If the Company keeps growing at this pace, especially with low payout ratios, it could eventually increase dramatically.
Technical BUY Signals are Mounting
Wingstop’s correction is old news as it’s broken past all three support levels ($119.46, $112.74, and $109.11). Despite its surge, it still has some wiggle room before potentially touching its first resistance point at $129.81.
Barchart also spots several short-, medium-, and long-term technical indicators as BUY signals, such as its:
- 20 Day Moving Average
- 20 – 50 Day MACD Oscillator
- 20 – 100 Day MACD Oscillator
- 50 Day Moving Average
- 100 Day Moving Average
- 150 Day Moving Average
As one of July’s Most Unanimously Upgraded Stocks, WING Could Move as Much as 26.83%
According to Tipranks, 17 Wall Street analysts offered 12-month price targets for Wingstop in the last 3 months. It has a high price target of $150.00, a low of $70.00, and an average of $124.35. Now, while the average price target limits the stock’s upside at 5.14% from its $118.27 close on August 1, 2022, consider Wingstop’s recent analyst activity as a better barometer for its upside.
- Cowen- OUTPERFORM and boosted price target from $100.00 to $140.00
- Truist Financial- Boosted price target from $130.00 to $145.00
- Barclays- Boosted price target from $101.00 to $144.00
- Robert W. Baird- Boosted price target from $120.00 to $150.00
- Wedbush-OUTPERFORM and boosted price target from $105.00 to $135.00
So, needless to say, Wingstop’s $150 price target, aka a 26.83% upside, looks a bit more realistic than the stock just mustering a 5% gain or declining. Undoubtedly, this is a stock with all the qualities it needs to be one of the best stocks to buy now.
WING’s year-to-date low and high are $67.67 and $178.68, respectively.
Dine Brands Global, Inc. (NYSE:DIN)
The holding company for Applebee’s and IHOP is a unanimous BUY with a 24.02% upside.
Dine Brands Global is a big deal with 1,611 Applebee’s and 1,751 IHOP franchised and area licensed restaurants under its belt as of December 31, 2021. While not a stock that’s scorching hot quite like Wingstop, DIN sits as one of the best stocks to buy now for similar reasons. It’s also successfully navigated treacherous inflation waters with solid margins and growth initiatives.
Most importantly, the stock has rallied 17.08% over the last six weeks and could have even more room to run based on analyst upside.
Gear Up for Next Week’s Earnings…the Potential is Massive
Nobody has a crystal ball when it comes to investing. But based on DIN’s previous quarterly earnings and the upside potential for next week’s report (August 8, 2022), it looks mighty encouraging as one of the best stocks to buy now.
Dine Brands Global last announced its quarterly earnings results on May 4, 2022, and beat both top line and bottom line estimates. Revenue came in at $230.42 compared to analyst estimates of $230.18 million and increased 12.8% year-over-year. EPS came in at $1.54 compared to consensus analyst estimates of $1.44.
So with Dine Brands Global expected to see its earnings grow by 15.98% in the coming year, keep a close eye on what happens next week. Especially since it’s beaten 10 of its last 12 earnings estimates.
Source: Barchart
Your best bet may be to get in now.
Outstanding Fundamentals and Deep Value
Although the DIN stock is up over 17% since touching its two-month lows in June, it still sits -13.56% below its highs.
When you realize the stock has the following multiples coupled with a nearly perfect 8 out of 9 Piotroski Score indicating healthy Liquid Balance Sheets, Profitability, and Operating Efficiency, the deep value case for DIN becomes even more breathtaking.
- 7x trailing P/E ratio
- 4x forward P/E ratio
- 07 PEG ratio
- 3x trailing price-to-sales
- 3x forward price-to-sales
With its valuation also implying an outstanding 11.5% free cash flow yield and margins like a 10.9% unlevered ROA, 41.1% gross margin, and 22.1% operating margin, Dine Brands looks even more like a no-brainer as one of the best stocks to buy now.
On top of it all, a 2.84% dividend yield is nothing to complain about.
Analysts See a 24.02% Upside
According to TipRanks, DIN is a unanimous STRONG BUY. 6 of 6 Wall Street analysts who offered 12-month price targets for DIN in the last 3 months rated it a BUY. The stock currently has a high price target of $106.00, a low of $85.00, and an average of $89.00. The average price target represents a 24.02% upside from August 1, 2022’s closing price of $71.76.
DIN’s year-to-date low and high are $60.57 and $83.02, respectively.
