Restaurants increase convenience and give many people a place to unwind. It also feels like demand is strong as consumers always seem to be chasing the next hot place or viral fast food creation on social media. No surprise the industry has returned 25.6% over the past six months, beating the S&P 500 by 10.1 percentage points.

Regardless of these results, investors should tread carefully as many companies will light cash on fire by opening new locations without the proper justifications. Taking that into account, here are three restaurant stocks boasting durable advantages.

Chipotle (CMG)

Market Cap: $79.58 billion

Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE: CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.

Why Will CMG Outperform?

1. Aggressive strategy of rolling out new restaurants to gobble up whitespace is prudent given its same-store sales growth
2. Same-store sales growth over the past two years show it’s successfully drawing diners into its restaurants
3. Customer loyalty and massive revenue base of $10.98 billion give it meaningful negotiating power with suppliers

At $59.78 per share, Chipotle trades at 47.2x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.

Wingstop (WING)

Market Cap: $8.87 billion

The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ: WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.

Why Are We Backing WING?

1. Customers are lining up to eat at its restaurants as their same-store sales growth averaged 19.2%
2. Disciplined cost controls and effective management result in a strong two-year operating margin of 25.8%
3. Strong free cash flow margin of 20.7% enables it to reinvest or return capital consistently, and its growing cash flow gives it even more resources to deploy

Wingstop is trading at $305 per share, or 68.4x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.

Sweetgreen (SG)

Market Cap: $3.78 billion

Founded in 2007 by three Georgetown University alum, Sweetgreen (NYSE: SG) is a casual quick service chain known for its healthy salads and bowls.

Why Is SG on Our Radar?

1. Fast expansion of new restaurants to reach markets with few or no locations is justified by its same-store sales growth
2. Same-store sales growth averaged 5.2%, showing it’s bringing new and repeat diners into its restaurants
3. Earnings per share grew by 58.4% annually over the last three years, massively outpacing its peers

Sweetgreen’s stock price of $33.59 implies a valuation ratio of 118.5x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.

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