Ruth's Chris Steak House: Serving Up Promise

Carnivors hungry for a high-quality steak appreciate the tender cuts served at Ruth's Chris Steak House. Now some analysts say that the retaurant chain's stock, which went public last August, is looking tasty, too.

Founded as a single restaurant in New Orleans in 1965, Ruth's Chris has grown into the largest high-end steak house chain in the U.S., with about 90 locations worldwide. (The company owns slightly less than half of the restaurants; the rest are franchised.) Hurricanes Katrina and Wilma dealt a tough blow to Ruth's last fall, damaging some of its restaurants and prompting management to move headquarters to Orlando.

But the corporate transition is now finished, and the company is ready for growth, according to analyst Peter Oakes of Piper Jaffray. Oakes says the company generated solid sales in the fourth quarter. Sales grew 8.5% at company-owned locations open at least one year, and 8% at franchised locations. The company said Tuesday that it expects same-store sales to grow between 4.5% and 5.5% in 2006, higher than its previous forecast of 3% to 4%. That Ruth's caters to an affluent crowd bodes well, in Oakes's view, because high-end customers aren't as sensitive to the ups and downs of the economy as diners at mainstream casual restaurants are.

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Cowen Co. analyst Paul Westra also likes the stock (symbol RUTH). He sees plenty of room for Ruth's Chris to expand to additional markets and says that its proven brand, strong management team and appeal to a wide range of customers should keep it "the undisputed leader" in the fast-growing fine-dining business. He thinks the company could eventually open more than 300 new locations.

The stock has been volatile. After debuting at $20, the shares fell to $16 in mid November. They've since recovered to $22, as of Wednesday, or 26 times the 86 cents per share that analysts expect the company to earn in 2006. Westra figures that the stock is worth $28.

--Lisa Dixon