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Papa John's (PZZA) Shares Up 24% YTD: More Room to Run?

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Papa John’s International, Inc. (PZZA - Free Report) has been benefitting from digital efforts, robust comps growth and expansion initiatives. Also, focus on loyalty program and product introduction have been important factors for sales improvement over the last few quarters.

So far this year, shares of Papa John’s have gained 24% compared with the industry’s 11% growth. The price performance was backed by a solid earnings surprise history. Papa John’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters. Earnings estimates for 2021 and 2022 have moved up 31.1% and 21.5%, respectively, in the past 60 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Major Growth Drivers

Digitization Efforts: 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 in the past several years in response to increasing utilization of online and mobile web technology. In fact, Papa John’s is committed toward providing better customer experience with enhancements to digital ordering process. Meanwhile, the company’s loyalty program continues to witness a rise in digital transactions during first-quarter fiscal 2021. Notably, higher transaction sizes along with better targeting of offers and promotions have been benefitting the company.

Robust Comps Growth: Papa John’s continues to impress investor with robust comparable sales growth. The company recorded positive comparable sales growth in first-quarter fiscal 2021, which marks the fifth straight quarter of comps growth. Notably, the company benefitted from initiatives revolving around menu innovation, operational efficiencies and cost-saving efforts. In fiscal first quarter, global restaurant sales (excluding foreign currency impact) rose 26.6% compared with 5.4% growth reported in the prior-year quarter. During the quarter, comps at system-wide international restaurants were up 23.2% year over year compared with 2.3% growth in the prior-year quarter.

Emphasis on Expansion: Meanwhile, Papa John’s is committed toward developing and maintaining a strong franchise system. The company is continually striving to eliminate barriers for expansion in existing international markets and identify new market opportunities.

Recently, the company in association with franchise partner PJ Western Group announced expansion plans in Germany. Through this partnership, the company opened first seven Papa John’s restaurants in Magdeburg and Leipzig. Additionally, it plans to open another six stores in Halle and Merseburg by the end of summer 2021. The company also stated that it intends to open 250 new restaurants in Germany over the next seven years.

Focus on Menu Innovation: Additionally, the company continues to focus 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 boosting the top line. Backed by better brand positioning, the new products have driven higher ticket and traffic across dayparts without cannibalizing core premium products as well as complicating operations at other stores.

Other Key Picks

Some other top-ranked stocks in the same space include Chuy's Holdings, Inc. (CHUY - Free Report) , Dine Brands Global, Inc. (DIN - Free Report) and Potbelly Corporation (PBPB - Free Report) . Chuy's Holdings and Dine Brands sport a Zacks Rank #1, while Potbelly carries a Zacks Rank #2 (Buy).

Chuy's Holdings has a trailing four-quarter earnings surprise of 127.6%, on average.

Dine Brands’ 2021 earnings are expected to surge 269.3%.

Potbelly has a three-five year earnings per share growth rate of 15%.

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