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Papa John’s Stock Rose after Earnings Beat

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Dec. 4 2020, Updated 10:50 a.m. ET

Stock performance

Papa John’s (PZZA) outperformed analysts’ revenue and EPS estimates in the first quarter. The company’s same-store sales in North America fell 6.9%—better than analysts’ expectation of a fall of 7.3%. The better-than-expected first-quarter performance appears to have led to a rise in Papa John’s stock price. The company’s stock price was trading 2.8% higher in the after hours of trading on May 7.

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YTD stock performance

After Papa John’s lost 29.0% of its stock price last year, the company had an excellent start this year. The stock has returned 29.1% YTD (year-to-date) as of May 7. Papa John’s has outperformed Domino’s Pizza (DPZ) and Yum! Brands (YUM), which have returned 11.9% and 10.4%, respectively. The Consumer Discretionary Select Sector SPDR ETF (XLY), which invests in restaurant and travel companies, has returned 18.8%.

Valuation multiple

Investors are optimistic about Shaquille O’Neal, a former NBA player, being appointed to the company’s board of directors. The announcement by John Schnatter, Papa John’s founder, that he will step down from the company’s board led to a rise in the company’s stock price. The increase in Papa John’s stock price since the beginning of this year has raised its valuation multiple. As of May 7, Papa John’s was trading at a forward PE ratio of 41.5x—compared to 26.6x at the beginning of 2019.

Papa John’s has been trading at a higher forward PE ratio than its peers. Domino’s Pizza and Yum! Brands are trading at forward PE ratios of 23.9x and 25.5x, respectively.

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