Buffalo Wild Wings Inc. (NASDAQ: BWLD) saw its shares tumble back in April, but since that time they have made a handy recovery to an even higher level and a 52-week high. One key analyst weighed in on the company’s position going forward and was fairly positive on the outlook.

Oppenheimer upgraded Buffalo Wild Wings to Outperform from Perform with a $230 price target, implying 16% upside from current prices, and it raised 2016 estimates above Wall Street estimates. The firm raised its 2016 EPS estimate to $7.20 from $6.75. The consensus estimate from Thomson Reuters calls for $7.08.

Unit growth may be slowing, but this is not a near-term concern. Buffalo Wild Wings’ double-digit EPS algorithm should be sustainable for many years. International is just sprouting and smaller concepts are being tested with capital capacity for more exciting/impactful acquisitions in the future.

The brokerage firm gave a few key points in its analysis:

• Oppenheimer believes this model is equipped with levers to materially out-earn consensus in 2016.
• Its improving free cash flow profile appears underappreciated, could support an inaugural buyback and gives the balance sheet flexibility.
• At a 10.4 EBITDA multiple, valuation is attractive risk/reward relative to the peer group, particularly for top-tier same-store sales (SSS) and unique earnings upside.

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In its report Oppenheimer detailed:

With revenue expected in low-20% range and our vision for margin expansion, we justify upside to Street’s +26% estimate Every 100 basis points of margin should add 14% to EPS with margin opportunities detailed within. Plus, comps should remain healthy and we urge investors not to be spooked by ’16 guidance at “typical” 20%-level.

After years of trivial generation, free cash flow could balloon to over $125 million, given steady capital expenditures with expanding operating cash flow. This, along with significant debt capacity, creates case for a first-ever buyback or more accretive acquisitions. Every $100 million of unlevered buybacks should be an addition of $0.20 to EPS.

Buffalo Wild Wings stock is up from the $150 mark in June, but stock is actually only up over 9% year to date. At 10.4-times EBITDA, the stock is attractive relative to peers, particularly with top-tier SSS (mid-singles), above-average unit growth, earnings set to overgrow next year in Oppenheimer’s view and an appetite for accretive acquisitions.

Shares of Buffalo Wild Wings were up 1.5% at $199.08 Wednesday morning. The stock has a consensus analyst price target of $203.23 and a 52-week trading range of $122.15 to $199.41.

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