A Few Reasons to Invest in This Pizza Company for the Long Run

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Feb 01, 2015

Papa John’s (PZZA, Financial) is benefiting from its home strategy. Papa John’s has always been working on bringing in new pizzas with new ingredients, and it is glad to see the response from customers. A 7% increase in the sales is a clear indication that customers are accepting Papa John’s pizza. Looking ahead, Papa John’s is expecting solid earnings growth despite certain commodity headwinds.

What will drive growth

Papa John’s is counting on some key aspects such as pizza quality, service levels, distribution, marketing, digital capabilities. It is now focusing well to improve these key areas every day which will help its franchisees and corporate operators to deliver best pizza experience in the industry. With the growing leadership position in the market, Papa John’s is now accelerating its pace in the digital arena also. Papa John’s is thinking that with the best-in-class pizza quality, this growth in the digital channel will elevate Papa John’s position the market as well as among consumers.

Moving on, Papa John’s has undertaken good marketing strategies that is taking a good shape as the early return from this initiative is a clear indication that it moulding Papa John’s as a stronger brand in the market. On the international front, Papa John’s is also seeing good comp growth and unit volume which is contributing to its international revenue. But Chinese market for Papa John’s seems to be headwind for it. The management of the company is evaluating the short comings and is making efforts to improve its position in China as well.

Focus on a better infrastructure

Besides maintaining good quality pizzas, it is also focusing on developing better people, better technology, better branding and better customer experience. This will trigger its ongoing success and improves its results. The successful results have encouraged Papa John’s pizza well and being in line with this, Papa John’s now expecting better sales. It has posted a good 5% to 7% increase in the sales guidance. The company is positive about good opportunities that it is seeing in response to the positive efforts it is putting to elevate its position in the market.

It is majorly focused on technological improvement. It is expected to gain good market share on the back of it in future. The company is seeing good customer loyalty towards the brand and some of the initiatives such as Papa Rewards Loyalty Program has been a trigger. To take this to a better level, Papa John’s continues to make digital innovations investments in some key areas which can significantly enhance the overall customer experience. It is also positive its new system known as FOCUS and it is thinking it to have a positive impact on the overall store level operations and customer experience.

Conclusion

With a trailing P/E of 38.32, Papa John’s is quite reasonable, while the forward P/E of 30.00 indicates good growth in the earnings in the near term as well. In fact in the next five years Papa John’s earnings are growing at a CAGR of 15.00% which is more that the industry average of 14.34%. Thus this indicates that Papa John’s can also be a good long term holding. Considering all these facts I would like to suggest the investors to definitely pick Papa John’s in their portfolio.