"Appetizing" Comps for Earnings Jumps

"Can I borrow your towel for a sec? My car just hit a water buffalo." – Chevy Chase in Fletch, 1985

Buffalo Wild Wings BWLD reported earnings after market close this past Thursday that missed expectations. How badly was the stock beaten up on Friday? The stock price jumped up close to $13, or 7 percent.

Although net earnings for the quarter were flat vs. a year ago, investors were more interested in the solid growth story. The company saw a 20 percent jump in revenues year over year, and same store sales at company owned restaurants in 2014 were up 6.5 percent. They also announced same store sales in the first 5 weeks of Q1 of close to 12 percent (company owned) and new menu initiatives specific to regions and sporting events that helped send shares higher. So where does the stock go from here?

Many investors position themselves ahead of and after earnings to maximize their profitability. Here are a few questions being asked about Buffalo Wild Wings this morning:

• After an extreme move up like this, is there still upside?
• Should we wait for a better entry point to further build our position?
• Should we lock in some gains at this point?

The problem for most investors is the lack of objective statistics to help answer these questions. Usually its recalling experiences with how similar stocks traded in similar situations, or looking at times where this particular stock had an extreme move on earnings without being able to capture valuable information about the pattern going into the print.

Are there comparables for this situation, i.e. has Buffalo Wild Wings traded in a similar fashion previously both going into earnings, and then jumping in a similar fashion one day after earnings? What typically happens next?

EidoSearch provides an objective response to these questions in seconds. For this example we took the last 10 days, including Friday's big jump, and looked just at Buffalo Wild Wings history to see if there are any statistically similar patterns with the earnings release on the 9th day of the pattern. We found 4 similar instances in their history, and 43 instances in Restaurant stocks.

The stock is up in all 4 instances an average of 3.2 percent. Comps below:

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Looking at restaurant stocks, we found 43 similar instances and the stock is up an average of 1% in the next week with almost 3 times the upside to the downside.

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By the way, according to the National Chicken Council, Buffalo Wild Wings customers consumed over 10 million chicken wings during this year's Super Bowl. That's almost 1% of all the chicken wings consumed by Americans for the big game.