Kura Sushi (NASDAQ:KRUS): A High-Growth Company Priced for Perfection?
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Kura Sushi (NASDAQ:KRUS): A High-Growth Company Priced for Perfection?

Story Highlights

Kura Sushi, a leader in the burgeoning US sushi market, outperformed with its recent Q2 2024 financial results, but investors may want to proceed with caution given its optimistically overvalued stock.

Sushi has grown into a $34 billion market in the U.S., propelling the sushi restaurant industry into 5% growth annually for the past five years. The Japanese restaurant concept, Kura Sushi (NASDAQ:KRUS), is at the forefront of this growing culinary trend. This high-growth company has been rapidly expanding in the U.S., and its stock has increased by over 67% in the past year. The stock is now richly valued, fully reflecting the company’s growth potential. This high-growth company is therefore likely priced to perfection, and thus investors might want to proceed cautiously or hold off altogether and wait for another window of opportunity.

Kura Sushi’s Revolving Revolution

Kura Sushi USA is a technology-driven Japanese restaurant brand with 60 locations across 17 states and Washington, D.C. The company’s business model is based on a unique and interactive sushi conveyor belt that winds its way through each restaurant. The company seeks to deliver a distinctive dining experience centered on authentic Japanese cuisine. The company is a subsidiary of Kura Sushi, Inc., a Japan-based revolving sushi chain with a significant global footprint of 550+ restaurants and four decades of brand history.

The company’s concept involves a blend of advanced technology, premium ingredients, and affordability, enhancing the dining experience. Since its inception, the company has seen substantial growth and has become the largest revolving sushi chain in the U.S.

Kura Sushi’s Recent Financials & Outlook

The company recently reported financial results for Q2 of 2024. Total sales were $57.3 million, which was significantly higher than the sales of $43.9 million in the same quarter of the previous year, a growth rate of over 30%.

Net loss remained the same at $1 million for this quarter, translating into -$0.09 per diluted share, which is a minor improvement from the -$0.10 per diluted share in Q2 of 2023. During this quarter, the company expanded operations by opening five new restaurants, while dealing with severe weather that was felt throughout the industry.

Looking ahead, for the full Fiscal year of 2024, the company is projecting total sales to range between $243 million and $246 million. Moreover, the company plans to open roughly a dozen new restaurants this year.

What is the Price Target for KRUS?

The stock has been trending, climbing over 236% in the past three years. It demonstrates positive price momentum, trading above the 20-day (106.65) and 50-day (100.13) moving averages.

However, that sustained climb in price has driven the stock into richly valued territory. The company’s P/S ratio of 5.7x sits well above the Consumer Cyclical sector average of 1.2x and the Restaurant industry average of 3x.

Analysts following the company have been bullish. Kara Sushi is rated a Moderate Buy based on the ratings and 12-month price targets issued by six Wall Street analysts in the past three months. The average price target for KRUS is $111.17, which represents a 0.90% upside from current levels.

Kara Sushi in Summary

Kura Sushi has made significant strides in the market, becoming the largest revolving sushi chain in the U.S. and a preferred choice among consumers. Despite the company’s impressive Q2 2024 financial results, which outperformed expectations, its stock now appears optimistically valued, suggesting that its growth potential may be more than fully priced in. While the growth and expansion plans remain robust, investors might want to tread cautiously and consider waiting for another window of opportunity.



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