Is Papa John’s stock a good value play?
Papa John's International, Inc. (NASDAQ: PZZA) is one of the largest pizza delivery restaurant chains in the United States. The company operates and franchises pizza delivery and carryout restaurants under the Papa John's brand in the U.S. and internationally. In total, there are more than 5,000 Papa John’s locations in 45 countries and territories around the world.
On Jan. 26, Papa John's declared a quarterly dividend of $0.225 per common share, payable on Feb. 19 to shareholders of record on or before Feb. 8. The company has regularly paid dividends to its stockholders since 2013. Papa John’s currently has a dividend yield of 0.89% and a forward annual dividend of $0.90 per common share.
Furthermore, the company is expected to report fourth-quarter earnings later this month on Wednesday, Feb. 25 before markets open. Analysts project the company to report an earnings per share (EPS) of $0.46. Papa John’s has beat Wall Street's earnings expectations on three of its last four quarterly reports.
For the fourth quarter of 2019, Papa John's beat analysts’ expectations by a margin of $0.05 and reported earnings of $0.37 per share. For the first quarter of 2020, PZZA reported a decrease to its EPS down to $0.15 and missed expectations by a significant margin of $0.24. Papa John's increased its EPS to $0.48 for the second quarter of 2020 and beat expectations by $0.03. In its most recent quarterly earnings report, PZZA reported $0.35 per share. The company also beat earnings expectations by a margin of $0.03 once again.
Drilling down. Papa John's stock has been cooling from its late-January peak, though it still sports a year-to-date lead of over 19%. The equity has more than tripled off its mid-March trough, and support at its 20-day moving average has kept some of these losses in check. Year-over-year, PZZA is up 54%.
From a fundamental perspective, Papa John's lacks consistent growth. The company's revenues have fallen nearly $200 million in the past 3 years. However, its worst year in terms of revenue was actually not 2020, despite the pandemic’s negative impact. Papa John's worst revenue decline was in 2018, when its top-line sales decreased by more than $200 million. PZZA has also generated $6.7 million in net losses this past year. By comparison, Papa John's net income is down by roughly $11 million since 2019 and down by $110 million since 2017. To top it all off, Papa John’s currently trades at a sky-high price-earnings ratio of 122.41.