North America And Southeast Asia Digital Expansion Will Improve Resilience

Key Takeaways

• Strong international and franchise-driven expansion, combined with digital adoption, is boosting sales, operational efficiency, and margin quality across multiple brands.
  
• Deliberate capital structure shifts and coffee brand growth enhance profitability and diversify income, supporting resilient and accretive long-term earnings.
  
• Changing consumer trends, cost pressures, and ambitious expansion strategies threaten Jollibee's margins and earnings stability, increasing exposure to operational and franchisee-related risks.

Catalysts

Develops, operates, and franchises quick service restaurants.

• Jollibee's robust international expansion, especially in North America and Southeast Asia, is showing sustained double-digit system-wide and same-store sales growth, with localized product and value positioning strengthening market penetration-this underpins potential for faster-than-expected topline revenue growth and greater resilience of global earnings.
  
• Accelerated adoption of digital platforms (mobile app, loyalty programs, delivery channels) is beginning to drive both customer frequency and operational efficiency, pointing to long-term improvements in revenue per store and potential cost leverage, boosting both sales and net margins.
  
• The asset-light, franchise-focused models being rolled out in China (Super Value store) and with Smashburger (conversion of company-owned to franchise) are improving capital efficiency and return on invested capital, which, combined with operational improvements, are likely to drive higher margins and better earnings quality.
  
• Strong growth in coffee and tea brands, particularly the successful integration and aggressive expansion of Compos Coffee, leverages the structural lift from rising middle-class consumption in Asia and global urbanization, fueling multi-brand revenue diversification and stable, high-margin franchise-driven income streams.
  
• The company's deliberate capital structure shift toward higher debt utilization, amid declining interest rates and falling input costs (notably coffee beans), is decreasing its weighted average cost of capital (WACC) and is set to widen the ROIC-WACC spread, supporting more accretive earnings and potential for higher net income growth.

Jollibee Foods Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Jollibee Foods's revenue will grow by 7.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.4% today to 4.5% in 3 years time.
• Analysts expect earnings to reach ₱16.4 billion (and earnings per share of ₱13.38) by about September 2028, up from ₱9.9 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₱11.6 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 30.5x on those 2028 earnings, up from 26.5x today. This future PE is greater than the current PE for the PH Hospitality industry at 12.7x.
• Analysts expect the number of shares outstanding to decline by 0.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.66%, as per the Simply Wall St company report.

Jollibee Foods Future Earnings Per Share Growth

Risks

• Rising health consciousness and shifting consumer preferences toward healthier, plant-based, or organic food options may negatively affect demand for Jollibee's core fried and indulgent menu, which could slow long-term revenue growth.
  
• Persistent inflationary pressures and rising input costs, combined with Jollibee's strategy of not fully passing on these costs to consumers, may compress gross and net margins, impacting overall profitability and future earnings.
  
• Aggressive international expansion and acquisition-led growth may expose Jollibee to risks of brand fatigue, operational inefficiencies, and integration challenges in new and existing markets, leading to volatility in revenue and downward pressure on margins.
  
• Increasing labor costs and regulatory changes around minimum wage in developed and emerging markets, while currently claimed as nominal, may become more material over the long term, squeezing operating margins and earnings.
  
• Growing dependence on franchise and asset-light models, while supporting rapid expansion, heightens exposure to the performance and financial health of franchisees, which could result in revenue concentration risks and greater earnings volatility, especially in tough economic cycles.

Valuation

• The analysts have a consensus price target of ₱290.182 for Jollibee Foods based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₱330.0, and the most bearish reporting a price target of just ₱196.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₱361.7 billion, earnings will come to ₱16.4 billion, and it would be trading on a PE ratio of 30.5x, assuming you use a discount rate of 15.7%.
• Given the current share price of ₱234.0, the analyst price target of ₱290.18 is 19.4% higher.
• 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.