2 New High-Quality Stocks to Buy in 2023?

Morningstar’s equity analysts recently brought two new small-cap restaurant operators under coverage, both of which possess competitive advantages that have earned them narrow economic moat ratings. But are their stocks attractive today? Let’s find out.

The first new company brought under coverage is Papa John’s International PZZA. Papa John’s is the third-largest limited service pizza player in the U.S. market and the fourth largest globally. Known for its “better ingredients, better pizza” mantra, Papa John’s maintains a premium position in the quick-service restaurant pizza space. As a result, it has been able to better pass along inflationary pressures to consumers. We think high-single-digit annual operating profit growth between 2023 and 2032 is doable, and we think its shares are worth $72 each. The stock is about fairly valued.

2 New High-Quality Stocks to Buy in 2023?

1. Papa John’s International PZZA
2. Wingstop WING

The second company new to coverage that we’re looking at today is Wingstop WING. Wingstop has experienced explosive growth, posting 19 straight years of comparable-store sales growth. And we think there’s plenty more growth to come: In fact, we expect Wingstop to experience 15%-16% average annual sales growth over the next five years. Plus, the chain’s company-owned restaurants are projected to generate 25% restaurant-level margins in 2023, which puts Wingstop in the top quartile of our restaurant coverage. However, we think shares are grossly overvalued.

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Morningstar analyst Sean Dunlop provided the research behind this segment.

Watch “3 Cheap Stocks to Buy” for more from Susan Dziubinski.