Year 2016 was perhaps the worst year for the restaurant industry since the end of recession. However, there are some players like Bojangles’, Inc. that seem to be relatively untroubled by the worries. This Zacks Rank #2 (Buy) rated company has good prospects and should make a value addition to your portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings & Revenue Growth

Bojangles’ makes for a great pick in terms of Growth investment. Arguably, nothing is more important than earnings growth as surging profit levels is often an indication of strong prospects (and stock price gains) ahead for the company in question.

While Bojangles’ has put up a historical EPS growth rate of 8.5%, investors should really focus on the projected growth. Here, the company is looking to grow at a rate of 16.2%, crushing the Zacks categorized Retail-Restaurants industry’s average, which calls for EPS growth of just 10.6% in comparison.

Solid revenue growth is expected to further propel the company’s earnings forward. The projected sales growth for the current year stands at 9.2%, while the broader industry’s estimate stands at just 3.5%, which is less than its half.

For all these reasons the company currently has a Growth Score of ‘B’ on our new style score system that helps us to identify potential outperformers.

Valuation Looks Reasonable

Bojangles’ has a Value Style Score of ‘B.’ The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount.

The company is currently trading at a trailing 12-months P/E multiple of 19.6x, while the industry’s average stands at 24.8x. Moreover, its forward P/E also stands lower at 19.81x compared with the industry’s average of 22.6x.

The PEG ratio is also an important indicator as this metric looks to show investors how much they are paying for each unit of earnings growth. Bojangles’ here too seems to be impressive as its PEG stands at 1.36 while the industry’s average is at 1.68.

All these ratios deem the company undervalued in comparison with its industry peers and indicate a good time to buy.

Stock Price & Other Returns

Shares of Bojangles’ have returned about 18% over the last one year, widely outpacing the industry, which grew about 1.6% in the same time frame. We noticed that Bojangles’ has outperformed the industry in each of 4-week, 12-week and 52-week time frames.

Moreover, the return on equity (ROE) delivered in the trailing 12 months was an impressive 17.4%, while the industry returned 8.6%.



Earnings History and Future Estimates

Bojangles’ has remarkably beaten earnings estimates in each of the reported quarters since its IPO in 2015, with an average beat of 17.23% in the last four quarters.

Furthermore, upward estimate revisions reflect optimism in the stock’s prospects. Analysts have bumped up their earnings estimates for 2016 and 2017 by 4.4% and 3% respectively, over the past two months.

Bottom Line

Bojangles’ is expected to perform well in the quarters ahead based on all these statistics. However, investors should be cautious about higher labor costs and pre-openings costs that could hurt the company’s margins. A challenging sales environment is hurting most restaurateurs including Brinker International, Inc. (EAT Quick QuoteEAT - Free Report) , YUM! Brands, Inc. (YUM Quick QuoteYUM - Free Report) , Darden Restaurants, Inc. (DRI Quick QuoteDRI - Free Report) , to name a few. Nevertheless, we are hopeful on the stock’s prospects, going ahead.

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