3 Overpriced Restaurant Stocks to Sell

Restaurants stocks like DNKN, PZZA and EAT stock are hitting all-time highs -- and now look far too pricey

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Papa John’s International (PZZA)

papa-johns-pizza-pzza-stockNoted Papa John’s (PZZA) franchisee Peyton Manning might have embarrassed himself in the Super Bowl, but that did nothing to hurt this pizza slinger. PZZA stock is up 14% for the year-to-date and has roughly doubled in the past year.

Papa John’s enjoyed 9.6% earnings growth in the most recent quarter on a 6.4% gain in revenue, but PZZA stock looks to have gotten far ahead of bottom-line expansion. PZZA has a forward P/E that is now 66% more expensive than its own five-year average, as well as 41% more pricey than the S&P 500. PZZA stock is also expensive on a trailing earnings basis, trading at premiums of 76% and 26% to its five-year average and the broader market, respectively. The PEG is 26% higher than the five-year, while P/S is almost double its own long-term multiple.

Predictably, a significant 3.5% of the PZZA stock float is sold short, up from 3% just two weeks ago. As good as the gains have been, it might be time to lighten up on PZZA stock, and these other red-hot restaurant names, as well.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, http://investorplace.com/2014/02/dnkn-pzza-eat-stock/.

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