Is Small Cap Red Robin Gourmet Burgers (RRGB) a Delicious Restaurant Stock? FRS & SONC

On Tuesday, small cap casual dining stock Red Robin Gourmet Burgers, Inc (NASDAQ: RRGB) was bucking the Dow to head higher after earnings, meaning its worth looking more closely at the stock to see what its doing right in the fickle restaurant space plus take a look at the performance of potential (non-fast food) peers like Frisch's Restaurants, Inc (NYSEMKT: FRS) and Sonic Corporation (NASDAQ: SONC).

What is Red Robin Gourmet Burgers, Inc?

Founded in 1969, small cap Red Robin Gourmet Burgers is a casual dining restaurant chain calls itself the Gourmet Burger Authority for serving more than two dozen "craveable, high-quality burgers with Bottomless Steak Fries." In addition to its burger offerings, Red Robin Gourmet Burgers serves a wide variety of salads, soups, appetizers, entrees, desserts and signature Mad Mixology Beverages plus an extensive selection of local and regional beers and innovative adult beer shakes and cocktails. As of the end of the first quarter of 2014, there were 362 Company-owned Red Robin restaurants, five Red Robin's Burger Works and 129 franchised Red Robin restaurants – a total of 496 restaurants across the United States and Canada.

As for potential peers, lightly traded Frisch's Restaurants, Inc operates full service family-style restaurants (with menu items such as the original Big Boy double-deck hamburger sandwich) under the name "Frisch's Big Boy" in various regions of Ohio, Kentucky and Indiana while Sonic Corporation owns the largest chain of drive-in restaurants in America with more than 3,500 drive-ins serving approximately 3 million customers every day that's been voted America's "#1 burger quick service restaurant."

What You Need to Know or Be Warned About Red Robin Gourmet Burgers, Inc?

Investors thought Red Robin Gourmet Burgers' earnings report was delicious after the burger chain topped analyst estimates by a dime in the first quarter. Specifically, Red Robin Gourmet Burgers reported an 11.1% increase in first quarter revenues to $340.5 million, a comparable restaurant revenue increase of 5.4% and a 26.0% net income increase to $11.9 million for a 24.2% EPS increase to $0.82 from $0.66. The company also gave a positive outlook that does not include the impact of the anticipated acquisition of 32 restaurants  for approximately $40 million (the deal is expected to close in late summer) or company plans to open 20 new Red Robin restaurants and five Red Robin's Burger Works.

In the earnings call (the transcript is available on Seeking Alpha here), the CEO commented:

"Despite industry headwinds, we outperformed our peers in traffic for the eighth consecutive quarter. We notched a 315 basis point positive variance to the category over the 16-week period as measured by Black Box Intelligence. We attribute most of this to our marketing programs new product innovation and guest engagement initiates implemented in our restaurants. We also believe we're seeing the continued benefits of the new plating and presentation, the new menu and RRR service components that we piloted in our original brand transformation locations and consequently accelerated through the entire system last summer."

Top Blue Chip Stocks To Watch Right Now

On the subject of potential headwinds hitting the restaurant industry right now, the CFO/SVP commented in the Q&A:

"I think the biggest impact will be the increased labor cost in California that really impacted second half and again if you compare it to the original guidance we had in the first quarter assumed that -- in the first quarter it assumed that we would have some additional cost related to labor roll-out that we didn't have. So, we got those benefits quicker than we thought and rest of it was really, well it was really built in the guidance for the rest of the year. You will continue to get some commodity increase more in the back half than we had in the first half as well."

And said this about commodity inflation:

"…the first quarter was around 2.5% and we think for the year, it will continue to be still around three."

Plus the overall environment out there:

"Well, again, guest counts is the toughest thing to get right now, it's a real battle… And the other thing I continue to caution everybody on is it is a competitive environment out there, right. So, what could stop us is a competitor doing something else that really either resonates with guests or does something that do something really drive their sales or guest traffic that we don't react to so."

Otherwise, it should be noted that Red Robin Gourmet Burgers has a trailing P/E of 32.34 and a forward P/E of 20.99 along with no dividend.

Share Performance: Red Robin Gourmet Burgers, Inc vs. FRS & SONC

On Tuesday, small cap Red Robin Gourmet Burgers jumped 12.45% to $71.80 (RRGB has a 52 week trading range of $46.11 to $86.83 a share) for a market cap of $1.03 billion plus the stock is down 4.2% since the start of the year, up 45.3% over the past year and up 257.7% over the past five years. Here is a look at the long term performance chart for Red Robin Gourmet Burgers, Frisch's Restaurants, Inc and Sonic Corporation:

Notice how performance for all three has bounced around in recent months, but Red Robin Gourmet Burgers followed by Sonic Corporation have been clear outperformers.

Finally, here is a look at the latest technical charts for Red Robin Gourmet Burgers (with downward trending lines), Frisch's Restaurants, Inc and Sonic Corporation:

The Bottom Line. While small cap Red Robin Gourmet Burgers looks like a solid growth stock, its always better to buy on a dip or just when growth is set to take off. Nevertheless and for investors who have not yet eaten at Red Robin Gourmet Burgers, the stock still looks rather tasty.