PZZA Stock Overview
Papa John's International, Inc. operates and franchises pizza delivery and carryout restaurants under the Papa John's trademark in the United States and internationally.
Papa John's International Competitors
Price History & Performance
|Historical stock prices|
|Current Share Price||US$75.38|
|52 Week High||US$140.68|
|52 Week Low||US$72.66|
|1 Month Change||-8.11%|
|3 Month Change||-11.48%|
|1 Year Change||-39.79%|
|3 Year Change||43.36%|
|5 Year Change||6.76%|
|Change since IPO||3,776.69%|
Recent News & Updates
Papa John's Stock? No. Short Puts? Definitely.
Summary I think Papa John's is a decent, recession-proof business, and I'm intrigued by the fact that the shares have declined about 37% over the past year. Although the dividend is reasonably well covered, I don't think the shares are sufficiently cheap. I'll remind investors that the preservation of capital is of critical importance. Thankfully the options market offers reasonably good risk-adjusted returns by selling put options. Over the past year, shares of Papa John's International Inc. (NASDAQ:PZZA) are down about 37%, and this has me intrigued. I'm of the view that Pizza is a relatively recession resistant foodstuff, and I'm of the view that we're on the brink of a recession, and therefore the product that these people sell should hold up relatively well in my view. It doesn't hurt that my former employer has recently characterised this company as a "favourite idea to capitalise on potential consumer-trade down effect with restaurants." I'll decide whether or not it makes sense to take a position in this business by looking at the financial history, paying particular attention to the sustainability of the dividend. In addition, I'm going to look at the valuation, because, as we should all know by now, a great business can be a disastrously bad investment if you overpay for it. Welcome to the "thesis statement" portion of my article. It's here where I present you with the "gist" of my thinking. I do this for a few reasons. First, you may have missed the title and the bullet points, above. This will give you one more opportunity to glean the highlights of the article before you wade into it. Second, I offer the thesis statement paragraph in a heroic effort to potentially save you some time. You're welcome. Finally, I know that my writing can be a bit tough to take for some. For example, some may be bothered by the fact that I spell words like "labour" and "favourite" properly. Whatever the reason that rings most true for you, I think we can all agree that there's no doot aboot the fact that the "thesis statement" is a handy addition to every article. I'm of the view that Papa John's is a great business with a sustainable dividend. I don't like the addition of debt, but I'll admit that it's been worse in the past, and that future contractual calls on cash aren't egregious in my view. The problem for me is that the stock is neither cheap nor expensive at the moment, so this isn't a very compelling investment at current levels. Just because I don't want to buy the stock, though, doesn't mean that there's nothing to be done here. I think investors can earn a reasonable, though not huge, premium from selling relatively deep out of the money put options. As I think I've demonstrated on many occasions on this forum, these are a great way to enhance returns while reducing risk. Financial Snapshot I'd characterise the long term financial history here as "choppy." I describe it thus because both revenue and net income have moved around fairly dramatically over the years. For example, revenue reached $1.783 billion in 2017, and crashed to $1.619 billion two years later. Over the same time span, net income crashed from $102.3 million to $4.87 million. An investor who buys this stock should not expect a smooth ride, or consistent upward growth. That written, the company has remained consistently profitable over the years, with the exception of 2021, which was negatively impacted by a $109.85 million dividend on redemption of Series B Convertible Preferred stock. The one thing that does disturb me somewhat is the fact that the level of indebtedness has grown dramatically over the past few years. For example, it's up about 26.6% over the past year alone. That written, it has been higher (in 2018), and the company is sitting on a relatively large cash hoard of $52.15 million, which represents about 9.7% of total indebtedness. Thus, I don't worry about a solvency crisis here anytime soon. Dividend Sustainability I'm as interested in financial history as the next finance nerd, but investors are particularly interested in a company's financial future for obvious reasons. In particular, people may be interested to learn about the level of dividend sustainability for two reasons. First, the cash flows received from dividends help smooth investor returns, and they obviously make planning your financial future much easier. Second, a sustainable dividend is obviously supportive of stock price. So, readers may be curious about what goes on with the dividend. If you readers have an itch, I'm absolutely committed to scratching it, so I want to spend some time writing about the dividend. When it comes to tracking the sustainability of a given dividend, I look at cash. I specifically want to compare the size and timing of future cash obligations to the current and likely future sources of cash. Let's start with the obligations. I've taken the liberty of clipping the size and timing of future debt payments from page 41 of the latest 10-K for your enjoyment and edification. We see from the table below that the company is "on the hook" for ~$62.6 million this year, and an average of about $55 million over the next two years. Papa John's Contractual Obligations (Papa John's latest 10-K) Against these obligations the company has about $52.15 million in cash and equivalents. Additionally, they've generated an average of $144 million in cash from operations over the past three years, while spending an average of about $45.7 million on CFI activities. All of the above suggests to me that the dividend is very well covered. For this reason, I'd be very happy to buy shares at the right price. Papa John's Financials (Papa John's investor relations) The Stock My regulars know that I've talked myself out of some profitable trades with the words "at the right price", but I'd rather miss out on some gains than lose capital. My regulars also know that I consider the "business" and the "stock" to be quite different things. Every business buys a number of inputs and turns them into a final product. In this case moderately tasty pizza. The stock, on the other hand, is an ownership stake in the business that gets traded around in a market that aggregates the crowd's rapidly changing views about the future health of the business, future demand for pizza and other "trade down" food choices. It may also be the case that some analyst decides that "future growth catalysts" are weaker than once thought, and the stock falls in price in sympathy, in spite of absolutely no change at the company. The stock also moves around because it gets taken along for the ride when the crowd changes its views about "the market" in general. So, in some sense, the stock is "doubly buffeted" by the crowds' rapidly changing views about a given company, and the crowd's rapidly changing views about the overall stock market. This is troublesome, but it's a potential source of profit because these price movements have the potential to create a disconnect between market expectations and subsequent reality. In my experience, this is the only way to generate profits trading stocks: by determining the crowd's expectations about a given company's performance, spotting discrepancies between those assumptions and stock price, and placing a trade accordingly. I've also found it's the case that investors do better/less badly when they buy shares that are relatively cheap, because cheap shares correlate with low expectations. Cheap shares are insulated from the buffeting that more expensive shares are hit by. As my regulars know, I measure the relative cheapness of a stock in a few ways. For example, I like to look at the ratio of price to some measure of economic value, like earnings, sales, free cash, and the like. I like to see a company trading at a discount to both the overall market, and to its own history. At the moment, the company is trading near the middle of its valuation range, per the following: PZZA data by YCharts While the shares are neither cheap nor expensive, I think it's noteworthy that the dividend yield is on the high side. So, while investors may be paying an average price, they're getting an above average income stream from this stock. PZZA data by YCharts In addition to looking at simple ratios, I actually use a large number of other, more complex valuation measures, one of which involves trying to understand the assumptions currently embedded in price. If you read me regularly, you know that I rely on the work of Professor Stephen Penman, and increasingly Mauboussin and Rappaport to do this. This approach uses the stock price itself as a source of information. It involves "reverse engineering" the assumptions that cause the current price. When I apply this approach to Papa John's, it seems the market is assuming growth of about 4% going forward at the moment. Just like the stock price itself, this is neither overly attractive, nor unattractive. Given that I'm in the mood to preserve capital rather than buy companies that are "neither cheap nor dear", I'll pass on Papa John's at current prices. Options As Alternative Just because I don't want to buy at the current price, doesn't mean I think there's no way to make money here. Given the sustainability of the dividend, I'd be happy to buy Papa John's at the right price. I have a choice in how I might do this. I can wait for the shares to fall in price. Not only is this boring, but the shares may never fall sufficiently in price. Alternatively, I can generate some income today by selling put options with strike prices that I'd be willing to pay. I've characterised these as "win-win" trades because the outcome is great no matter what happens. If the shares remain above the strike, I'll simply pocket the premium, which is never a hardship. If the shares fall, I'll be obliged to buy, but will do so at a price that I determined to be a good one. Additionally, I'll be "less badly off" than the people who bought at today's market price, which is also a decent outcome. In terms of specifics, I like the April 2023 short put with a strike of $60. I'd be happy to buy at this level, because it lines up with a relatively cheap price to sales ratio of about 1.05. This price also lines up with a nice 2.05% dividend yield. These are currently bid at $0.60 So, if the shares don't happen to drop 27% over the next seven months, I'll pocket this premium. If the shares fall below $60, I'll be obliged to buy, but will do so at a net price of $59.40. This is also a very positive outcome in my view. This is why I characterise these as "win-win" trades. It's that time again. Welcome to the point in the article where I get to indulge in my semi-sadistic tendency to spoil people's moods by pointing out that the phrase "win-win" is really just a bit of rhetoric. This trade, like all others, comes with risk. I consider the risks associated with these instruments to fall into two broad categories: the economic and the emotional. Starting with the economic risks, I'd say that the short puts I advocate are a small subset of the total number of put options out there. I'm only ever willing to sell puts on companies I'd be willing to buy, and at prices I'd be willing to pay. So, I would never advocate that people simply sell puts with the highest premia. In my view, that strategy would lead to disastrous results. So my first bit of advice is to only ever sell puts on companies you want to own at (strike) prices you'd be willing to pay. Take my word on this one, as it's informed by painful history.
Is There An Opportunity With Papa John's International, Inc.'s (NASDAQ:PZZA) 24% Undervaluation?
Today we'll do a simple run through of a valuation method used to estimate the attractiveness of Papa John's...
|PZZA||US Hospitality||US Market|
Return vs Industry: PZZA underperformed the US Hospitality industry which returned -33.9% over the past year.
Return vs Market: PZZA underperformed the US Market which returned -23.7% over the past year.
|PZZA Average Weekly Movement||5.4%|
|Hospitality Industry Average Movement||7.3%|
|Market Average Movement||6.9%|
|10% most volatile stocks in US Market||15.7%|
|10% least volatile stocks in US Market||2.8%|
Stable Share Price: PZZA is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 5% a week.
Volatility Over Time: PZZA's weekly volatility (5%) has been stable over the past year.
About the Company
Papa John's International, Inc. operates and franchises pizza delivery and carryout restaurants under the Papa John's trademark in the United States and internationally. It operates through four segments: Domestic Company-Owned Restaurants, North America Commissaries, North America Franchising, and International Operations. The company also operates dine-in and delivery restaurants under the Papa John’s trademark internationally.
Papa John's International Fundamentals Summary
|PZZA fundamental statistics|
Is PZZA overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|PZZA income statement (TTM)|
|Cost of Revenue||US$1.46b|
Last Reported Earnings
Jun 26, 2022
Next Earnings Date
Nov 03, 2022
|Earnings per share (EPS)||2.53|
|Net Profit Margin||4.24%|
How did PZZA perform over the long term?See historical performance and comparison
2.2%Current Dividend Yield
Is PZZA undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score 5/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Key Valuation Metric
Which metric is best to use when looking at relative valuation for PZZA?
Other financial metrics that can be useful for relative valuation.
|What is PZZA's n/a Ratio?|
Price to Earnings Ratio vs Peers
How does PZZA's PE Ratio compare to its peers?
|PZZA PE Ratio vs Peers|
|Company||PE||Estimated Growth||Market Cap|
CBRL Cracker Barrel Old Country Store
JACK Jack in the Box
PZZA Papa John's International
Price-To-Earnings vs Peers: PZZA is good value based on its Price-To-Earnings Ratio (29.8x) compared to the peer average (36.8x).
Price to Earnings Ratio vs Industry
How does PZZA's PE Ratio compare vs other companies in the US Hospitality Industry?
Price-To-Earnings vs Industry: PZZA is expensive based on its Price-To-Earnings Ratio (29.8x) compared to the US Hospitality industry average (16.4x)
Price to Earnings Ratio vs Fair Ratio
What is PZZA's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
|Current PE Ratio||29.8x|
|Fair PE Ratio||33.9x|
Price-To-Earnings vs Fair Ratio: PZZA is good value based on its Price-To-Earnings Ratio (29.8x) compared to the estimated Fair Price-To-Earnings Ratio (33.9x).
Share Price vs Fair Value
What is the Fair Price of PZZA when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: PZZA ($75.38) is trading below our estimate of fair value ($107.44)
Significantly Below Fair Value: PZZA is trading below fair value by more than 20%.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.
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How is Papa John's International forecast to perform in the next 1 to 3 years based on estimates from 14 analysts?
Future Growth Score3/6
Future Growth Score 3/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: PZZA's forecast earnings growth (38.6% per year) is above the savings rate (1.9%).
Earnings vs Market: PZZA's earnings (38.6% per year) are forecast to grow faster than the US market (14.7% per year).
High Growth Earnings: PZZA's earnings are expected to grow significantly over the next 3 years.
Revenue vs Market: PZZA's revenue (4.4% per year) is forecast to grow slower than the US market (7.6% per year).
High Growth Revenue: PZZA's revenue (4.4% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: Insufficient data to determine if PZZA's Return on Equity is forecast to be high in 3 years time
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How has Papa John's International performed over the past 5 years?
Past Performance Score1/6
Past Performance Score 1/6
Growing Profit Margin
Earnings vs Industry
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: PZZA has a high level of non-cash earnings.
Growing Profit Margin: PZZA became profitable in the past.
Past Earnings Growth Analysis
Earnings Trend: PZZA's earnings have declined by 35.7% per year over the past 5 years.
Accelerating Growth: PZZA has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.
Earnings vs Industry: PZZA has become profitable in the last year, making it difficult to compare its past year earnings growth to the Hospitality industry (36.2%).
Return on Equity
High ROE: PZZA's liabilities exceed its assets, so it is difficult to calculate its Return on Equity.
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How is Papa John's International's financial position?
Financial Health Score1/6
Financial Health Score 1/6
Short Term Liabilities
Long Term Liabilities
Financial Position Analysis
Short Term Liabilities: PZZA has negative shareholder equity, which is a more serious situation than short term assets not covering short term liabilities.
Long Term Liabilities: PZZA has negative shareholder equity, which is a more serious situation than short term assets not covering long term liabilities.
Debt to Equity History and Analysis
Debt Level: PZZA has negative shareholder equity, which is a more serious situation than a high debt level.
Reducing Debt: PZZA's has negative shareholder equity, so we do not need to check if its debt has reduced over time.
Debt Coverage: PZZA's debt is not well covered by operating cash flow (19.1%).
Interest Coverage: PZZA's interest payments on its debt are well covered by EBIT (8x coverage).
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What is Papa John's International current dividend yield, its reliability and sustainability?
Dividend Score 2/6
Cash Flow Coverage
Current Dividend Yield
Dividend Yield vs Market
|Papa John's International Dividend Yield vs Market|
|Company (Papa John's International)||2.2%|
|Market Bottom 25% (US)||1.7%|
|Market Top 25% (US)||4.7%|
|Industry Average (Hospitality)||2.0%|
|Analyst forecast in 3 Years (Papa John's International)||2.3%|
Notable Dividend: PZZA's dividend (2.23%) is higher than the bottom 25% of dividend payers in the US market (1.67%).
High Dividend: PZZA's dividend (2.23%) is low compared to the top 25% of dividend payers in the US market (4.68%).
Stability and Growth of Payments
Stable Dividend: Whilst dividend payments have been stable, PZZA has been paying a dividend for less than 10 years.
Growing Dividend: PZZA's dividend payments have increased, but the company has only paid a dividend for 9 years.
Earnings Payout to Shareholders
Earnings Coverage: With its reasonable payout ratio (56.5%), PZZA's dividend payments are covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its high cash payout ratio (242.7%), PZZA's dividend payments are not well covered by cash flows.
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How experienced are the management team and are they aligned to shareholders interests?
Average management tenure
Rob Lynch (45 yo)
Mr. Robert M. Lynch, also known as Rob, has been President and Chief Executive Officer of Papa John's International, Inc. since August 26, 2019 and also its Director since 2019. Mr. Lynch joined Papa John...
CEO Compensation Analysis
|Rob Lynch's Compensation vs Papa John's International Earnings|
|Date||Total Comp.||Salary||Company Earnings|
|Jun 26 2022||n/a||n/a|
|Mar 27 2022||n/a||n/a|
|Dec 26 2021||US$7m||US$900k|
|Sep 26 2021||n/a||n/a|
|Jun 27 2021||n/a||n/a|
|Mar 28 2021||n/a||n/a|
|Dec 27 2020||US$6m||US$900k|
|Sep 27 2020||n/a||n/a|
|Jun 28 2020||n/a||n/a|
|Mar 29 2020||n/a||n/a|
|Dec 29 2019||US$7m||US$312k|
Compensation vs Market: Rob's total compensation ($USD7.24M) is about average for companies of similar size in the US market ($USD6.90M).
Compensation vs Earnings: Rob's compensation has been consistent with company performance over the past year.
Experienced Management: PZZA's management team is considered experienced (3.4 years average tenure).
Experienced Board: PZZA's board of directors are considered experienced (3.7 years average tenure).
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: PZZA insiders have only sold shares in the past 3 months.
Recent Insider Transactions
|25 Aug 22||SellUS$252,438||Marvin Boakye||Individual||2,950||US$86.04|
|24 Nov 21||SellUS$1,668,387||Robert Lynch||Individual||12,500||US$133.95|
|19 Nov 21||SellUS$532,077||Jack Swaysland||Individual||4,000||US$133.76|
|Owner Type||Number of Shares||Ownership Percentage|
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
|Ownership||Name||Shares||Current Value||Change %||Portfolio %|
Papa John's International, Inc.'s employee growth, exchange listings and data sources
- Name: Papa John's International, Inc.
- Ticker: PZZA
- Exchange: NasdaqGS
- Founded: 1984
- Industry: Restaurants
- Sector: Consumer Services
- Implied Market Cap: US$2.664b
- Shares outstanding: 35.35m
- Website: https://www.papajohns.com
Number of Employees
- Papa John's International, Inc.
- 2002 Papa John’s Boulevard
- United States
|Ticker||Exchange||Primary Security||Security Type||Country||Currency||Listed on|
|PZZA||NasdaqGS (Nasdaq Global Select)||Yes||Common Stock||US||USD||Jun 1993|
|PP1||DB (Deutsche Boerse AG)||Yes||Common Stock||DE||EUR||Jun 1993|
Company Analysis and Financial Data Status
|Data||Last Updated (UTC time)|
|Company Analysis||2022/09/27 00:00|
|End of Day Share Price||2022/09/27 00:00|
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.