3 Stocks With 25% Sales Growth

Sales among U.S. companies are mostly down, but not quite as much as feared. Last quarter, the median S&P 500 company reported a 9% drop in sales versus a year earlier, but more companies beat Wall Street’s sales forecasts than missed them.

The three companies below stand in sharp contrast to the overall numbers at the moment. Their sales are soaring. Profits, too. Naturally, these companies’ share prices are up big this year, too—although not all of them seem expensive.

Market Value: $788 million
Sales Growth, Most Recent Quarter: 25%

With 620 restaurants, Buffalo Wild Wings (BWLD) is a little less than one-third the size of Applebee’s (which is owned, along with IHOP, by DineEquity (DIN)) and a little more than one-third the size of Chili’s (owned by Brinker International (EAT)). Sales for the two larger chains are expected to drop by double-digit percentages this year. Analysts forecast Buffalo’s sales for the year to increase 28%. What’s working? Analysts say the restaurant has separated itself from the bar-and-grill competition by becoming a hangout for sports fans. Two-thirds of sales come from wings and alcohol. Perhaps the big-game crowd is less budget-minded than families when it comes to meals out. Buffalo’s expansion efforts are aided by the company’s lack of debt and the tendency of its franchisees to earn healthy returns. Investors eyeing the stock today should do so cautiously, though, for two reasons. First, chicken wing prices are bizarrely high, recently topping even breast prices, likely because consumers are trading down from fancy dining to what they perceive as cheap eats. Buffalo has responded by pushing “boneless wings” (breast strips, really), but high wings costs are nonetheless crimping margins. Second, shares trade at a lofty 25 times forecast 2009 earnings.

Market Value: $812 million
Sales Growth, Most Recent Quarter: 98%

Sales for Par Pharmaceutical (PRX) are a bit misleading; they’re up sharply from a year ago but are declining from quarter to quarter. That’s because sales of the company’s generic version of Toprol XL, an AstraZeneca (AZN) medicine used to treat high blood pressure, are falling. Perhaps that’s for the best. Analysts say Par is reducing its reliance on authorized generics like the Toprol knock-off, which bring in plenty of sales but scant profits, and will instead work to develop generics internally without cutting deals with patent-holders. The first company to seek approval for a generic drug once the patent expires can secure 180 days of marketing exclusivity. Par recently secured such exclusivity for a generic form of Johnson & Johnson’s (JNJ) pain drug Ultram ER. Shares of Par seem inexpensive at 10 times earnings, even considering the possibility of a profit lull in 2010.

Market Value $2.2 billion
Sales Growth, Most Recent Quarter: 400%

Sugar prices in the third quarter were more than 60% higher versus a year earlier. That proved lucrative for Brazil’s Cosan (CZZ), the world’s biggest sugar cane processor. It swung to a profit on a fivefold increase in sales, thanks in part to a purchase last December of fuel distribution assets in Brazil from Exxon Mobil (XOM). Sugar cane can be used to make ethanol, and is far more suited to the job than corn, the primary source of U.S. ethanol. By the time crops are fertilized, processed and transported, it takes nearly three-quarters of a gallon of crude oil to produce a gallon of ethanol from U.S. corn, compared with only a pint or so of crude to make ethanol from Brazilian sugar. For now, Brazil’s sugar ethanol is used mostly at home, where many new cars are flex-fuel models designed to run on gasoline, alcohol or any combination of the two. Shares of Cosan have more than doubled this year, but still sell for a reasonable 0.6 times sales.