Digital Platforms And Global Expansion Will Increase Customer Convenience

Key Takeaways

• Digital transformation, menu innovation, and supply chain optimization are driving higher order frequency, improved margins, and long-term revenue growth.
  
• Emphasis on convenience and international expansion underpins sustained market share gains and extended global growth opportunities.
  
• Margin and earnings pressures from labor and cost inflation, weak product diversification, franchisee struggles, and strong competition threaten growth and long-term profitability.

Catalysts

Operates and franchises pizza delivery and carryout restaurants under the Papa Johns trademark in the United States, Canada, and internationally.

• Papa John’s accelerated investments in technology, highlighted by the Google Cloud partnership and enhanced CRM capabilities, are driving substantial gains in digital ordering, app conversion, and repeat purchases; with digital channels representing over 70 percent of sales and personalization being taken to the next level through AI-driven insights, this digital transformation is poised to significantly boost transaction growth, customer frequency, and ultimately drive higher revenue and improved net margins.
  
• The company is leveraging changing consumer behavior as busy lifestyles and off-premise dining trends increase demand for convenient meal solutions, positioning Papa John’s to capture incremental market share and expand its customer base, fueling long-term revenue growth and greater system-wide sales.
  
• Ongoing international expansion, especially in focus markets across Latin America, the UK, Spain, and the Middle East, continues to unlock new revenue streams, with the majority of international markets experiencing mid-single to double-digit growth; this global runway, combined with a disciplined refranchising and development pipeline, provides a sustained catalyst for robust top-line and earnings growth.
  
• Menu innovation remains a core priority, with accelerated product launches, oven recalibration enabling new crust formats, and barbell pricing strategies; these initiatives are driving higher order frequency, attracting new customer segments, supporting premium pricing, and have already resulted in sequential improvements in transaction share and average order size, all of which are expected to contribute to topline growth and margin expansion.
  
• Supply chain optimization, including enhancing capacity utilization, manufacturing, and distribution efficiency, is a multi-year, high-impact priority, directly targeting reduced cost to serve and improved 4-wall profitability for franchisees and company stores; savings from these initiatives are expected to materially improve EBITDA, net margins, and support future reinvestment, underpinning the most bullish long-term earnings projections for the company.

Papa John's International Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Papa John's International compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Papa John's International's revenue will grow by 3.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 3.8% today to 3.1% in 3 years time.
• The bullish analysts expect earnings to reach $71.6 million (and earnings per share of $2.2) by about July 2028, down from $77.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 36.5x on those 2028 earnings, up from 19.1x today. This future PE is greater than the current PE for the US Hospitality industry at 24.5x.
• Analysts expect the number of shares outstanding to grow by 0.34% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.69%, as per the Simply Wall St company report.

Papa John's International Future Earnings Per Share Growth

Risks

• Papa John’s faces sustained margin pressures from rising labor costs and ongoing wage inflation, as adjusted EBITDA margins in its company-owned restaurants declined approximately 550 basis points year over year, primarily driven by higher labor costs and inflation—this could continue to weigh on net margins and reduce earnings power over time.
  
• The company’s heavy reliance on core traditional pizza offerings leaves it vulnerable to the growing consumer preference for healthier, lower-calorie options; there were no notable moves in the call to diversify meaningfully into health-focused menus, heightening the long-term risk of revenue stagnation or decline as dietary trends shift away from standard pizza.
  
• Franchisee profitability remains challenged by rising food costs, labor, and rent, increasing risk of store closures or slowdowns in store growth; the company saw a $17 million decline in company-owned restaurant revenue partly due to closures and refranchising, making future system-wide sales growth and franchisee earnings less predictable.
  
• Papa John’s continues to experience intense competition from both traditional giants (such as Domino’s and Pizza Hut, where it admits to having weaker pricing power and market share in key markets) and fast-casual/premium/health-oriented brands, which may further limit revenue growth opportunities and compress market share.
  
• Accelerated investments in digital-first ordering, marketing, and infrastructure—while necessary—are placing significant pressure on near-term free cash flow and adjusted EBITDA guidance, and the company’s dependence on third-party delivery partners along with ongoing supply chain cost volatility in cheese/proteins may prevent sustainable improvement in operating margins and dampen future earnings growth.

Valuation

• The assumed bullish price target for Papa John's International is $60.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Papa John's International's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $38.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $2.3 billion, earnings will come to $71.6 million, and it would be trading on a PE ratio of 36.5x, assuming you use a discount rate of 9.7%.
• Given the current share price of $45.35, the bullish analyst price target of $60.0 is 24.4% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.