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Bear of the Day: Papa Murphy's Holdings (FRSH)

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It has been a pretty rough stretch for the restaurant sector. The space has largely underperformed the market over the past few months, and this is despite extremely high levels of consumer confidence.

The main problem appears to be concern over a restaurant bubble bursting, as well as intense competition in the space. The number of new players grows by the day, and there just isn’t room for all of these companies, particularly with changing consumer tastes.

One great example of this trend is Papa Murphy’s Holdings (FRSH - Free Report) . This company operates in the pizza market, but focuses on the ‘take & bake’ segment.

While this may have been a phenomenal idea years ago, it is a business that consumers are increasingly rejecting in favor of healthier and quicker options. As an example of this shift, consider FRSH’s stock price performance over the past two years which includes a loss of over two-thirds of the value.

But while things obviously haven’t been great for Papa Murphy’s, there is actually reason to fear more pain in the months ahead too. This is clear if we look to recent earnings estimate revisions which have been decidedly to the downside for this stock.

Recent Estimates

The consensus estimate has been falling like a stone for FRSH over the past few months, as ninety days ago the current year estimate called for EPS of 27 cents, and now it is down to nine cents per share. Meanwhile, the current quarter has fallen from a consensus estimate of 12 cents per share to just three cents per share today over the same time period.

Obviously, this is bad news for FRSH, but it really doesn’t stop there. That is because the most recent estimates for the current quarter have been even lower, as the most accurate estimate for FRSH stock is now at just one cent per share, a huge decline over the past 90 days.

And while some investors might think that such low expectations would make things easy for a company to crush estimates, that hasn’t been the case for Papa Murphy’s over the past year. FRSH has actually missed estimates in two of the last three reports, and has posted enormous misses that have produced a four quarter average of a 50% miss. No wonder the stock has a Zacks Rank #5 (Strong Sell) and why we are looking for some more pain ahead for this company’s shares in the near term.

Papa Murphy's Holdings Inc. Price, Consensus and EPS Surprise

Papa Murphy's Holdings Inc. Price, Consensus and EPS Surprise | Papa Murphy's Holdings Inc. Quote

Other Picks

Obviously, FRSH isn’t in a great spot right now, and could be headed for more turmoil in the months ahead. But, if you are looking for a different pizza pick, then consider Papa John’s International (PZZA).

This company has a Zacks Rank #2 (Buy) and a VGM Score of ‘B’, making it a solid choice for investors in the restaurant industry right now. This is especially true when you compare it some of the FRSH stats, so definitely give Papa John’s a closer look instead of FRSH, at least until Papa Murphy’s can turn things around on the earnings front and return to a position of growth.

 

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