Why Chefs' Warehouse's Shares Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of specialty food distributor Chefs' Warehouse (NAS: CHEF) were getting deep-fried today, falling as much as 23% in intraday trading after the company reported first-quarter results.

So what: Chefs' first-quarter numbers were a case of "good, but not quite good enough." Revenue for the quarter increased 18% to $98 million while adjusted earnings per share grew 8% from a year ago to $0.13. Wall Street analysts had been looking for EPS of $0.16 on revenue of $99 million, so investors were hit with a classic double miss.


Now what: Of course it's bad enough when current-quarter numbers don't measure up, but investors tend to get really heartbroken when guidance is lighter than expected. For the full year, management provided guidance that, at the midpoint, would have the company earning $0.93 in adjusted EPS on $457 million in revenue. While the sales tally is roughly in line with analysts' estimates, the EPS forecast is about $0.02 light.

With Chefs' Warehouse shares trading -- post today's drop -- at nearly 21 times management's expected 2012 earnings, investors are paying a relatively handsome price for shares. While the company is certainly growing, investors are obviously chewing on the math today to figure out whether it will grow enough to justify the stock's valuation.

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At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye. 

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