Wingstop (WING)

Fast-food chain Wingstop (NASDAQ:WING) fell short of the markets revenue expectations in Q3 CY2025, but sales rose 8.1% year on year to $175.7 million. Its non-GAAP profit of $1.09 per share was 18.6% above analysts’ consensus estimates.

Company Overview

The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ:WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.

Modern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.

Some competitors with counter service concepts include Noodles & Company (NASDAQ:NDLS), Potbelly (NASDAQ:PBPB), Shake Shack (NYSE:SHAK), and The Habit Burger Grill (owned by YUM! Brands, NYSE:YUM).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $683 million in revenue over the past 12 months, Wingstop is a small restaurant chain, which sometimes brings disadvantages compared to larger competitors benefiting from better brand awareness and economies of scale. On the bright side, it can grow faster because it has more white space to build new restaurants.

As you can see below, Wingstop grew its sales at an incredible 24.1% compounded annual growth rate over the last six years (we compare to 2019 to normalize for COVID-19 impacts) as it opened new restaurants and increased sales at existing, established dining locations.

This quarter, Wingstop’s revenue grew by 8.1% year on year to $175.7 million, missing Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 20.8% over the next 12 months, a deceleration versus the last six years. Despite the slowdown, this projection is noteworthy and suggests the market is baking in success for its menu offerings.

Number of Restaurants

A restaurant chain’s total number of dining locations influences how much it can sell and how quickly revenue can grow.

Wingstop sported 2,932 locations in the latest quarter. Over the last two years, it has opened new restaurants at a rapid clip by averaging 16.5% annual growth, among the fastest in the restaurant sector. This gives it a chance to scale into a mid-sized business over time. Additionally, one dynamic making expansion more seamless is the company’s franchise model, where franchisees are primarily responsible for opening new restaurants while Wingstop provides support.

When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.

Same-Store Sales

The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales provides a deeper understanding of this issue because it measures organic growth at restaurants open for at least a year.

Wingstop has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 11.9%. This performance along with its meaningful buildout of new restaurants suggest it’s playing some aggressive offense.

In the latest quarter, Wingstop’s same-store sales fell by 5.6% year on year. This decline was a reversal from its historical levels. A one quarter hiccup shouldn’t deter you from investing in a business, and we’ll be monitoring the company to see how things progress.

Wingstop has best-in-class unit economics for a restaurant company, enabling it to invest in areas such as marketing and talent. As you can see below, it averaged an elite 48.3% gross margin over the last two years. Said differently, roughly $48.28 was left to spend on selling, marketing, and general administrative overhead for every $100 in revenue.

Wingstop produced a 48.9% gross profit margin in Q3, up 1.4 percentage points year on year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as ingredients and transportation expenses) have been stable and it isn’t under pressure to lower prices.

Wingstop’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 25.7% over the last two years. This profitability was elite for a restaurant business thanks to its efficient cost structure and economies of scale. This is seen in its fast historical revenue growth and healthy gross margin, which is why we look at all three data points together.

Looking at the trend in its profitability, Wingstop’s operating margin might fluctuated slightly but has generally stayed the same over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Wingstop generated an operating margin profit margin of 27.9%, up 3.4 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Wingstop’s EPS grew at a remarkable 32.4% compounded annual growth rate over the last six years, higher than its 24.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

In Q3, Wingstop reported adjusted EPS of $1.09, up from $0.89 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Wingstop’s full-year EPS of $4.06 to grow 14.9%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Wingstop has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the restaurant sector, averaging 12.8% over the last two years.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Wingstop’s five-year average ROIC was 56%, placing it among the best restaurant companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

Wingstop reported $263.6 million of cash and $1.27 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $221.1 million of EBITDA over the last 12 months, we view Wingstop’s 4.5× net-debt-to-EBITDA ratio as safe. We also see its $79.24 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We enjoyed seeing Wingstop beat analysts’ EPS expectations this quarter. On the other hand, its same-store sales both declined and missed and its revenue fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 3.1% to $208 immediately after reporting.

Updated: December 4, 2025 at 9:34 PM EST

When considering an investment in Wingstop, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

There is a lot to like about Wingstop. For starters, its revenue growth was exceptional over the last six years. And while its brand caters to a niche market, its marvelous same-store sales growth is on another level. On top of that, Wingstop’s new restaurant openings have increased its brand equity.

Wingstop’s P/E ratio based on the next 12 months is 60.5x. Expectations are high given its premium multiple, but we’ll happily own Wingstop as its fundamentals shine bright. Investments like this should be held patiently for at least three to five years as they benefit from the power of long-term compounding, which more than makes up for any short-term price volatility that comes with high valuations.

Wall Street analysts have a consensus one-year price target of $318.08 on the company (compared to the current share price of $262.96).