Three Mouthwatering Stocks to Buy Now

This article was originally published by Zacks.com.

Everyone is looking for mouthwatering investment ideas — the kind that make you drool because they are so enticing. I have three of them, and they will excite you on multiple levels.

Hopefully you are not reading this article on an empty stomach…

Let them eat cake

Cheesecake Factory (CAKE) recently appeared on my radar screen even though I have been going to this restaurant and the Grand Lux for several years. My personal favorites include the baked potato soup and just about anyone of the "Glamburgers" they have on the menu.

Beyond all the good food, investors will enjoy a solid earnings history. Over the last 18 earnings reports, the company has missed twice and met the number twice; all the other times have been a positive earnings surprise. The most recent earnings release was in late April for the March 2013 quarter. The company beat the Zacks Consensus Estimate of $0.42 by a nickel for an 11.9% positive earnings surprise.

The June quarter is carrying some big expectations, with analysts calling for revenue of $475 million and earnings per share (EPS) of $0.57. Just meeting this number would make for a highly favorable comparison to the year ago revenue of $455 million and $0.51 EPS. The growth is likely due to a stronger consumer that has more discretionary income.

Estimates for CAKE have been inching higher over the last several months. The Zacks Consensus Estimate was sitting at $2.14 in March and has pushed higher to $2.16 in May and is now at $2.17. The same could be said of the 2014 Zacks Consensus, with the number moving from $2.43 to $2.46 to $2.47 over the same time period. That implies a 13.8% growth rate for earnings.

The valuation for this Zacks Rank #2 (Buy) stock are right in line with the industry average for most every metric. A 20x forward earnings multiple is slightly higher than the 17x industry average, but what I like to see is CAKE's higher net margin (5.6%) compared to the industry average (3.6%). Along with the 13.8% earnings growth rate, analysts are looking for 7.5% growth on the top line, and that is 33% above the 5% industry average.

Don't be chicken

Pilgrim's Pride (PPC) is a chicken producer that is another mouthwatering play. While it is not clear if they are a supplier for CAKE, they are for Yum Brands, Wendy's, Burger King and ConAgra Foods. On the retail side, PCC sells to grocers like Walmart, Publix, Kroger and SuperValu among others.

I have seen some tangential evidence of a good quarter upcoming for PPC. There have been channel checks that suggest several restaurants like CAKE and, specifically, Buffalo Wild Wings (BWLD) are trending ahead of expectations. Especially when a name like BWLD is mentioned to have good things coming due to their reliance on chicken wings in particular.

Estimates for FY2013 have been moving higher and higher. The 2013 calendar year started out with the Zacks Consensus sitting at $0.86, but that number jumped to $1.31 in April, and then again to $1.49 in May and now sits at $1.65. That is some excellent growth of nearly 100% in just six months.

The picture for 2014 is a little less clear, but still shows some growth. The Zacks Consensus for next year started the year at $1.18 and ticked higher to $1.22 in April. A big move up to $1.41 the following month and a subsequent move to $1.47 at the current level.

The valuation picture for PPC is a good one. With a trailing price-earnings ratio (PE) of 20.8x, the stock trades at a very small premium to the industry average of 19.5x. Not that great, but not that bad either. The impressive valuation metric is the forward PE of 9.3x compared to the 18x industry average. That is a significant discount for such a large player in the industry. The price to book of 4.1x carries a small premium to the 3.6x metric for the industry. Price to sales of 0.5x is only a fraction of the 2.4x industry average, so lots of room to expand there.

Now that you gained all that weight

Herbalife (HLF) makes a supplement for consumers that feel like all that chicken they have eaten at CAKE and supplied by PPC is starting to form a spare tire around their mid-section. Don't think the supplement alone will help you lose the extra weight — you need to exercise as well!

HLF has been the subject of two major short attacks over the last year and a half. First hedge fund manager David Einhorn got on the earnings conference call and asked if the company tracks the sales of its marketers. The multi-level marketing model wasn't clear to most investors and the stock was hurt. Then hedge funder manager Bill Ackman (who has bet big against HLF) came into the mix later in 2012 year and said the company was an outright fraud and needs to be investigated by the FTC.

Dan Loeb and Carl Icahn are both large-scale buyers of the stock, so with the shorts there are some longs. Loeb is mostly out of the stock by now, but Icahn is still in the stock in a big way.

HLF has a great history of beating the number. I would go so far as to say it’s a perfect record with 27 straight positive earnings surprises. The most recent report saw a beat of $0.20 or an 18% positive earnings surprise. The company also beat on the top line as well and has done so in each of the last 16 quarters (four years).

Estimates for HLF have been moving higher throughout the year. Starting the year at $4.64, the Zacks Consensus Estimate has just moved higher throughout the year. A big pop came April, following the earnings release, when the number moved to $4.77 and has since ticked higher to $4.81. Over the same time period the 2014 Zacks Consensus Estimate has moved from $5.19 to $5.50 and is now at $5.52.

The valuation for HLF is a great one, with nearly every metric investors look to showing the company trading at a discount to the industry average. The 10x forward PE is one that might even get value investors interested in the stock! The only metric that is a little heavy is the price to book, but that concern goes out the window when the 14% topline growth rate for this year is nearly triple that of the industry average. The net margin of 11.5% is also nearly triple that of the industry average which comes in at 3.6%.

Brian Bolan is a Stock Strategist for Zacks.com.

The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock. Nothing published by Physician’s Money Digest should be considered personalized investment advice. Physician’s Money Digest, its writers and editors, and Intellisphere LLC and its employees are not responsible for errors and/or omissions.