FWRG - First Watch Restaurant is defended at BofA with capacity initiatives seen boosting results

2023-03-08 07:16:01 ET

Bank of America kept a bullish view on First Watch Restaurant Group ( NASDAQ: FWRG ) after pointing to a Q4 earnings report that showed off strong traffic growth and moderating cost inflation trends even though revenue and EPS were behind the consensus marks.

Analyst Sara Senatore and team noted First Watch ( FWRG ) is in an enviable position of having more demand than capacity to serve it, although a recent initiatives are expected to help address that high quality problem. Those initiatives include larger store footprints, back of house equipment changes, specialized job functions and dining room waitlist management. New units with the updated setups are opening at volumes 7% higher than the system average.

On valuation, BofA thinks Buy-rated First Watch ( FWRG ) should trade at a premium consistent with its faster growth and higher returns. The firm applied a 15X multiple to the 12-month EBITDA estimate to arrive at a price objective of $20 PO, which was observed to be in line with high growth peers’ average of 15X.

See all the valuation metrics on First Watch Restaurant Group.

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