This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

March 11, 2010 - P. F. Chang's China Bistro (PFCB-NASDAQ) through its subsidiaries, engages in the ownership and operation of restaurants in the United States. It owns and operates two restaurant concepts, P.F. Chang's China Bistro and Pei Wei Asian Diner. It operates 197 full service Bistro restaurants and166 quick casual Pei Wei restaurants.

The P. F. Chang China Bistro features a blend of traditional Chinese food and American hospitality in a bistro setting. There is also a full service bar. Menu prices range from $4.95 to $22.95. The Pei Wei Asian Diners are more for the casual diner or someone who wants a quick meal. The menu features items from $6.50 to $9.00.

Here's what caught my attention about PFCB: the company went public in 1998 and with the exception of 2006, earnings increased every year. Projections suggest the trend will continue.

In 2006, earnings per share (eps) were $1.24. The following year, they went to $1.36, followed by $1.45, then $1.87. The consensus from 24 analysts is for this year to finish at $2.02 (with a range of $1.95 to $2.15), then in 2011 to reach $2.28 (with a range of $2.12 to $2.50). Revenues, as you might guess, are also rising. In 2007, they were $1.093 billion, then $1.198 billion, followed by $1.228 billion. This year, consensus estimate is for $1.23 billion, then for next year $1.30 billion.

Earnings for the last quarter of 2009 were a nice surprise, coming in at 52 cents a share, well above the 40 cents analysts estimated. In fact, 2 out of the last 3 quarters, the company reported higher than expected earnings. In March of '09, PFCB produced 56 cents a share vs. estimates of 33 cents, a 69.7% upside surprise. In June, it outdid estimates by 24.4%, delivering 51 cents eps vs a forecasted 41 cents. In September, it faltered, showing 27 cents eps vs an estimate of 31 cents. Then in December, it went back to its usual positive surprise, 30% above estimates. In the last quarter, revenues increased by 3% in the Pei Wei Asian Diners but fell 5.2% at the Bistro restaurants.

The company has limited expansion plans for 2010, the economy being what it is. Exepct about 6 to 8 new restaurants this year. That's why the growth in revenue forecast is low. Analysts see Pei Wei as most likely to show higher numbers this year while the Bistro numbers may stay slightly negative to flat.

The stock reflects much, if not all this good news. After the disappointment in 2006's results, investors started selling the stock, taking it from $47.10 in 2007 to a low of $14.50 in late 2008. After staying around that level for several months, the stock started its rebound, going from a low of $16.50 in 2009 to a high of $39.60. And it's kept going this year, reaching a current 52-week high of $44 as I write. Valuations are rather high with the P/E ratio at 24 and Price to Book of 2.96. Investors love this stock.

And why not. Management has delivered an exceptional string of ever increasing earnings, with 2006 as the only down year. The future looks very bright with international expansion on the drawing boards and plenty of room left in the U.S. for more restaurants.

More numbers: Market cap is $1.01 billion. Price to sales ratio is .81. Operating margin for the last 12 months was 5.26% and Profit margin was 3.52%. Return on equity was 13.31%. Return on assets was 6.12%. Total debt is $42.92 million. Book value per share is $14.64. Beta is .92. There are 22.93 million shares outstanding with a Float of 22.38 million. Insiders own 1.57%. Institutions own most of the float.

Aggressive investors should find this company of interest. It's growing in all the right ways. Management has proven it knows how to run restaurants and please shareholders. Expansion should be strong once the global economy improves. Still, buying this stock now implies perfect execution and better times. Having said that, the stock did hit an all-time high of $65.10 in 2005 when earnings were only $1.40 a share.

- Company Web site: www.pfchangs.com

 Ted Allrich