Is Papa John's International, Inc. (NASDAQ:PZZA) Potentially Undervalued?

By
Simply Wall St
Published
December 15, 2021
NasdaqGS:PZZA
Source: Shutterstock

While Papa John's International, Inc. (NASDAQ:PZZA) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$140 at one point, and dropping to the lows of US$119. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Papa John's International's current trading price of US$128 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Papa John's International’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Papa John's International

Is Papa John's International still cheap?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.8% below my intrinsic value, which means if you buy Papa John's International today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $133.17, then there’s not much of an upside to gain from mispricing. Furthermore, Papa John's International’s low beta implies that the stock is less volatile than the wider market.

What does the future of Papa John's International look like?

earnings-and-revenue-growth
NasdaqGS:PZZA Earnings and Revenue Growth December 15th 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Papa John's International's revenue growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level, or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in PZZA’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on PZZA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Case in point: We've spotted 3 warning signs for Papa John's International you should be aware of.

If you are no longer interested in Papa John's International, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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