Why Portillo's Stock Popped Today

Shares of restaurant chain Portillo’s (PTLO 15.49%) popped on Tuesday after closing out 2023 with financial results that beat expectations. As of noon ET today, Portillo’s stock was up about 17%.

A strong year for Portillo’s

Portillo’s is a small restaurant chain with 84 locations as of the end of 2023. Like many of its peers, the company raised menu prices in 2023 to offset inflation, but this didn’t deter diners. In the fourth quarter, menu prices were up 6% year over year but transactions were also up by 1.3% — an encouraging sign of consumer demand.

That demand is driving Portillo’s expansion plans. The company opened 12 new locations in 2023, a meaningful amount for a chain this small. And it expects to open at least nine new locations in 2024, which would be about 11% growth.

New restaurants and higher transactions are leading to better revenue and profits for Portillo’s. In 2023, the company had revenue of $680 million and operating income of $55.4 million. That was good for 16% growth and 34% growth, respectively.

Is Portillo’s stock cheap?

Even after today’s big jump, Portillo’s stock still only has a market capitalization of about $880 million. Given the company’s operating income, that’s an inexpensive valuation for a chain that expects robust ongoing growth.

And it expects that over the long term as well. The company intends to grow its number of restaurants by 12% to 15% annually. This should lead to strong top-line increases and higher profitability, which is why Portillo’s stock is definitely one that investors should consider buying.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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