1 Potential Red Flag for Restaurant Stocks

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The above video is from Monday's MarketFoolery podcast in which host Chris Hill, along with analysts Joe Magyer and Jason Moser, discuss the top business and investing stories. In this segment, the guys discuss why gross margins are a key metric for restaurant stocks, advising investors to pay close attention during the next round of earnings results. In response to a listener email, they analyze what the drought in the Midwest and the rising cost of commodities will mean for grocery stores and restaurants, looking at several stocks including Chipotle (NYS: CMG) , Yum! Brands (NYS: YUM) , Panera (NAS: PNRA) and McDonald's (NYS: MCD) .

In terms of Whole Foods (NAS: WFM) , it's hard to believe that a grocery store could book investors more than 30 times their initial investment, but that's just what the company has done for those who saw the organic trend coming some 20 years ago. However, today people are wondering if Whole Foods' growth is sustainable and whether the valuation is justified. That's why Fool.com analyst and Whole Foods expert Jim Mueller has authored a premium research report that lays out exactly how Whole Foods is able to command such incredible industry-topping margins and why the company's growth is actually still in its early stages, as well as the key opportunities and threats facing the store's future. As an added bonus, Jim will keep you up-to-date with a full year of analysis and guidance as news develops, so don't miss out -- click here now to claim your copy today.

The article 1 Potential Red Flag for Restaurant Stocks originally appeared on Fool.com.

Chris Hill has no positions in the stocks mentioned above. Jason Moser owns shares of Chipotle Mexican Grill and Panera Bread. Joe Magyer owns shares of Whole Foods Market. The Motley Fool owns shares of Chipotle Mexican Grill, McDonald's, Panera Bread, and Whole Foods Market. Motley Fool newsletter services recommend Chipotle Mexican Grill, McDonald's, Panera Bread, and Whole Foods Market. 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. The Motley Fool has a disclosure policy.

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