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Papa John's Stock Up 68% in 6 Months: More Room to Run?
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Papa John's International, Inc. (PZZA - Free Report) continues to benefit from product innovation, strategic partnerships, strong digital platform and international expansion. This is quite evident from the company’s shares, which have gained 68.2% in the past six months, compared with the industry’s rally of 35.8%. However, the coronavirus pandemic and high debt remain concerns. Let’s delve deeper.
Key Catalysts
The company remains focused on product introduction to drive growth. Notably, menu innovation like Garlic Parmesan Crust, toasted handheld Papadias and Jalapeno Popper Rolls continues to witness solid popularity among customers, thereby bolstering the top line. Backed by better brand positioning, the new products have driven higher ticket and traffic across dayparts without cannibalizing core premium products and complicating operations at other stores.
Many of Papa John’s restaurants are located in international markets like Europe, the Middle East, Latin America, Portugal and China, and continue to perform strongly. The company has inked developmental agreements in many regions including Mexico, Egypt, Russia, Spain, Chile, the Netherlands, Colombia and Boston. In 2019, it opened 233 international units, bringing the total number of open units to more than 2,100 stores across 48 countries outside the United States, including Portugal and Pakistan. The company added 92 net worldwide units in 2019. As of Mar 29, 2020, the company’s development pipeline included 1,140 restaurants (90 units in North America and 1,050 units internationally), the majority of which are scheduled to open over the next six years.
Papa John’s is investing heavily in technology-driven initiatives like digital ordering to boost sales. The company’s online and digital marketing activities have increased significantly over the past several years in response to increasing utilization of online and mobile web technology. In fact, Papa John’s remains committed toward providing a better customer experience with enhancements to its digital ordering process.
Moreover, the company recorded positive comparable sales growth in second-quarter 2020, which marks the second straight quarter of comps growth. Global restaurant sales climbed 19.1% against the year-ago quarter’s decline of 3.8%. Further, domestic company-owned restaurant comps rose 22.6% in the reported quarter versus a 6.8% decline in the year-ago quarter.
Concerns
The coronavirus pandemic, high costs and a challenging sales environment remain potent headwinds.
A strong balance sheet will help a company tide over the ongoing crisis. As of Jun 28, 2020, the company had $327.9 million of long-term debt, compared with $342.6 million at the end of Mar 29, 2020. Although debt has declined marginally, the company’s debt-to-capitalization at the end of second-quarter 2020 stands at 241%. Moreover, the company ended second-quarter 2020 with cash and cash equivalent of $75.7 million, which may not be enough to manage the high debt level.
Some better-ranked stocks in the same space include BJ's Restaurants, Inc. (BJRI - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) and Jack in the Box Inc. (JACK - Free Report) , each sporting a Zacks Rank #1.
BJ's Restaurants has a three-five year earnings per share growth rate of 15%.
Chuy's Holdings has a trailing four-quarter earnings surprise of 87.3%, on average.
Jack in the Box 2021 earnings are expected to surge 16.1%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Shutterstock
Papa John's Stock Up 68% in 6 Months: More Room to Run?
Papa John's International, Inc. (PZZA - Free Report) continues to benefit from product innovation, strategic partnerships, strong digital platform and international expansion. This is quite evident from the company’s shares, which have gained 68.2% in the past six months, compared with the industry’s rally of 35.8%. However, the coronavirus pandemic and high debt remain concerns. Let’s delve deeper.
Key Catalysts
The company remains focused on product introduction to drive growth. Notably, menu innovation like Garlic Parmesan Crust, toasted handheld Papadias and Jalapeno Popper Rolls continues to witness solid popularity among customers, thereby bolstering the top line. Backed by better brand positioning, the new products have driven higher ticket and traffic across dayparts without cannibalizing core premium products and complicating operations at other stores.
Many of Papa John’s restaurants are located in international markets like Europe, the Middle East, Latin America, Portugal and China, and continue to perform strongly. The company has inked developmental agreements in many regions including Mexico, Egypt, Russia, Spain, Chile, the Netherlands, Colombia and Boston. In 2019, it opened 233 international units, bringing the total number of open units to more than 2,100 stores across 48 countries outside the United States, including Portugal and Pakistan. The company added 92 net worldwide units in 2019. As of Mar 29, 2020, the company’s development pipeline included 1,140 restaurants (90 units in North America and 1,050 units internationally), the majority of which are scheduled to open over the next six years.
Papa John’s is investing heavily in technology-driven initiatives like digital ordering to boost sales. The company’s online and digital marketing activities have increased significantly over the past several years in response to increasing utilization of online and mobile web technology. In fact, Papa John’s remains committed toward providing a better customer experience with enhancements to its digital ordering process.
Moreover, the company recorded positive comparable sales growth in second-quarter 2020, which marks the second straight quarter of comps growth. Global restaurant sales climbed 19.1% against the year-ago quarter’s decline of 3.8%. Further, domestic company-owned restaurant comps rose 22.6% in the reported quarter versus a 6.8% decline in the year-ago quarter.
Concerns
The coronavirus pandemic, high costs and a challenging sales environment remain potent headwinds.
A strong balance sheet will help a company tide over the ongoing crisis. As of Jun 28, 2020, the company had $327.9 million of long-term debt, compared with $342.6 million at the end of Mar 29, 2020. Although debt has declined marginally, the company’s debt-to-capitalization at the end of second-quarter 2020 stands at 241%. Moreover, the company ended second-quarter 2020 with cash and cash equivalent of $75.7 million, which may not be enough to manage the high debt level.
Zacks Rank & Key Picks
Papa John’s currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the same space include BJ's Restaurants, Inc. (BJRI - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) and Jack in the Box Inc. (JACK - Free Report) , each sporting a Zacks Rank #1.
BJ's Restaurants has a three-five year earnings per share growth rate of 15%.
Chuy's Holdings has a trailing four-quarter earnings surprise of 87.3%, on average.
Jack in the Box 2021 earnings are expected to surge 16.1%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.3% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>