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Papa John’s: C

Papa John’s (NASDAQ:PZZA) was founded by “Papa” John Schnatter 30 years ago, but has hit a bit of a rough patch lately. PZZA shares slumped on Tuesday after the company restated its earnings due to an accounting error. Papa John’s also is facing a $250 million class-action lawsuit over alleged mobile phone ads and text messages.

Still, the company’s 5% growth in domestic same-store sales and 7% growth internationally is a solid foundation to build on, as is the company’s relationship with the NFL. Plus, Papa John’s has over 3,200 restaurants in the U.S. and nearly 1,000 restaurants in 35 other countries. Although the company characterizes customers as “cautious,” the chain expects to grow earnings by 10% to 14% in 2013. International markets will help drive that growth.

The bigger challenge for PZZA is convincing customers that its higher pizza price is delivering even greater value — possibly a tough sell given the discounts competitors are offering now. Of course, the stock is somewhat of a discount, too. It trades for 15 times forward earnings — lower than DPZ and YUM.

Article printed from InvestorPlace Media,

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