Wingstop (NASDAQ:WING) has quietly been certainly one of the best-performing stocks available on the market since its initial public offering in 2015. Actually, the chicken-wing restaurant has posted a median annualized return of 31.9% since its June 2015 IPO. During the last five years as of Feb. 22, it has had a median annualized return of 38.3%.

You possibly can put those returns up against almost some other stock over that stretch, even the Magnificent Seven, as only NVIDIA (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA) have performed higher over the past five years.

Last 12 months, Wingstop stock returned 87%, and even in 2022, it beat the S&P 500, posting a return of -17%. Now in 2024, Wingstop continues to shine, up roughly 35% 12 months to this point, including an 8% jump on Thursday — someday after posting strong fourth-quarter earnings results that beat estimates.

Where does Wingstop go from here? Can investors still expect that type of outperformance?  

Strongest 12 months on record for Wingstop

Wingstop had one other strong performance within the fourth quarter as its revenue increased 21% 12 months over 12 months within the quarter to $127 million. The corporate’s revenue includes royalties and charges from franchisees, company-owned restaurant sales, and promoting fees. Overall, Wingstop’s net income climbed 7% to $19 million within the quarter, or 64 cents per share.

The corporate’s broader system-wide sales jumped 24.5% in Q4 to $966 million, and that features net sales for all of its company-owned and franchised restaurants. Franchisees account for 98%, or 1,877, of Wingstop’s 2,214 total restaurants, 1,926 of that are within the U.S.

The corporate’s system-wide sales growth allows its management to gauge its royalty revenue, same-store performance, the health of its brand, and its competitive standing out there. System-wide sales growth is usually fueled by restaurant openings and increases in same-store sales. Within the fourth quarter, Wingstop had 115 net latest openings, and its same-store sales rose 21%.

For the total fiscal 12 months, Wingstop’s revenue rose 29% to $460 million, with system-wide sales up 27% to $3.5 billion. Net income spiked 32% to $70 million, or $2.35 per diluted share. The chain had 255 net latest openings for the 12 months, up 13%, and an 18% increase in domestic same-store sales.

Michael Skipworth, president and CEO of Wingstop, said, “2023 marked the strongest 12 months on record for Wingstop, where we achieved 18.3% domestic same-store sales growth, driven primarily by transactions, and we delivered an unprecedented 20 consecutive years of domestic same-store sales growth.”

One warning sign

Wingstop’s stock price initially sank about 4.6% on Wednesday after its earnings were released, probably on the outlook, which can have dissatisfied some investors. In its 2024 outlook, Wingstop called for 270 more latest stores and mid-single-digit domestic same-store growth. The latter could be lower than the 18% same-store sales growth in 2023. The corporate also expects selling, general and administrative costs to be $108 million for the 12 months, up from $96.9 million last 12 months.

On the earnings call, Chief Financial Officer Alex Kaleida said they’re targeting adjusted EBITDA growth of 15% in 2024, which could be lower than the 39% growth recorded in 2023.

Nonetheless, perhaps correcting an overreaction to a solid report, Wingstop stock jumped 8% on Thursday to $335 per share, hitting an all-time high of $340 through the trading session.

The projected slower growth will not be a giant concern, but Wingstop’s valuation is something to look at. The rocket ship it has been on has left it with an especially high valuation. Its price-to-earnings (P/E) ratio is 132, and its forward P/E is 108. It’s a very good company with loads going for it, but I’d be hesitant so as to add it without delay due to its high valuation, especially after this recent spike.

Disclaimer: All investments involve risk. By no means should this text be taken as investment advice or constitute responsibility for investment gains or losses. The data on this report mustn’t be relied upon for investment decisions. All investors must conduct their very own due diligence and seek the advice of their very own investment advisors in making trading decisions.