Why Wingstop Stock Plunged to a 52-Week Low Today

Motley Fool
20 Feb
  • Wingstop just barely came up short of expectations even though its growth rates were still impressive.
  • The company plans to open thousands of new restaurants over the long term, which could make today's drop a timely opportunity.

Since it went public in 2015, Wingstop (WING -13.29%) has been one of the greatest restaurant stock investments. This means it trades at 52-week highs more often than 52-week lows. But after reporting financial results for the fourth quarter of 2024, Wingstop stock finds itself at 52-week lows, having plunged by 12% as of 11 a.m. ET on Wednesday.

An expensive stock modestly disappoints investors

In 2024, Wingstop's same-store sales (comps) increased for a 21st consecutive year -- if there's a better streak out there, I'm not personally aware of it. Fourth-quarter domestic comps were up 10% year over year, which is usually a great number. But investors were let down because they had expected a higher number.

Wingstop experienced growth across the board in 2024. The company opened 349 net new restaurants, boosting its total by nearly 16%. Its revenue was up 36% to $626 million. And its net income was up 55% to $109 million. These are all great growth rates and demonstrate the company's strengths and rising popularity.

However, the stock was trading at over 20 times sales last year, an extreme price for a restaurant stock even when accounting for its fast growth and high-margin franchise model. In short, it seems that shares were due for a cooldown. And with fourth quarter comps coming in slightly below expectations, that's all the convincing that investors needed to abandon the stock.

Time to give Wingstop stock a look

For long-term shareholders, Wingstop shares are still up 75% over the last three years, which is a great return. And for those sitting on the sideline (like myself), this pullback is a great time to circle back and consider the stock.

Wingstop's 21 straight years of comps gains offer the clearest proof that this is a special company. And over the long term, management intends to open thousands of new locations, which should boost shareholder value. In conclusion, it may be trading at 52-week lows today, but the long-term trend should be higher.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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