Wingstop Shares May Have Flown Too High For Investors Seeking Near-Term Returns

Shares of Wingstop Inc WING have gained 34 percent year-to-date. Following the recent strength, there seems to be “less room for valuation expansion” in the near term, Baird’s David E. Tarantino said in a report. He maintained an Outperform rating on the company, but removed the stock from Baird’s Focus Idea List.

Analyst Tarantino raised the price target from $33 to $35, saying that Wingstop’s stock deserved a premium valuation in view of the company's healthy long-term growth prospects, strong near-term operating momentum, and asset-light business model.

Less Bullish NT, LT Intact

Although the stock’s risk/reward appears attractive at the current levels, returns could be limited in the near term, given the strong return year-to-date, Tarantino mentioned. Wingstop had recorded returns of 50 percent including special dividend year-to-date, versus Russell 2000’s 10 percent return.

“Our fundamental outlook is unchanged; we remain highly confident that WING can show healthy operating momentum in the balance of 2016, in 2017 (launching national television advertising), and longer term,” the analyst wrote.

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