Bojangles’ (BOJA), a Charlotte, North Carolina-based chicken n’ biscuits fast-food chain, gave its first earnings report as a public company yesterday.
The results were delightful, much like the restaurant’s Chicken Supremes Kids’ Meal. Unfortunately, Wall Street can’t appreciate Bojangles’ for what it is — a glorious Southern institution whose sweet tea rivals the nectar of the gods — and BOJA stock was trading slightly lower in early trading Friday.
Still, that’s about all the bad news there is.
BOJA, which went public in May at $19 per share, was already up 36% through yesterday’s close. And while the market’s initial reaction to Bojangles’ earnings wasn’t too enthusiastic, the fact that the chain beat on both earnings and revenue bodes well for the stock going forward.
Growth at a Discount to Peers
Adjusted earnings per share of 17 cents topped Wall Street’s consensus views by 2 pennies, while revenue also eked out a beat, coming in at $114.65 million against the $114.48 million estimate. BOJA revenue was just $96.2 million in the year-ago quarter, and the 19% annual growth rate shows the company continues to fire on all cylinders.
Perhaps more importantly, same-store sales at Bojanlges’ rose 7.9% in the fiscal first quarter — a clip that many restaurant chains would kill for.
For the sake of comparison, the clearly inferior (but nonetheless recently aggressive) Popeyes Louisiana Kitchen (PLKI) grew revenue by 13.4% last quarter, as global same-store sales increased by 7%.
Nice try, Popeyes, but you’ll have to do better than that.
And although we’re now veering into the realm of sandwiches, suffice it to say that companies like Potbelly (PBPB) can’t keep up with the pace of Bojangles’ growth, either: PBPB grew revenues by 16.1% last quarter and saw a same-store sales boost of 5.4%.
While I’ve been a fan of BOJA stock since its IPO, I will admit that the restaurant space is one of the most overvalued in the stock market today.
Just last week, Zoe’s Kitchen (ZOES) stock beat on earnings and revenue expectations, fueled by a 7.7% rise in same-store sales and revenue that jumped 36%. But, much like Shake Shack (SHAK) — which I dubbed the “most wildly overvalued stock on Wall Street” on May 22, the day its shares peaked — ZOES stock trades at an absurd premium: 255 times forward earnings. SHAK is nearly twice as expensive by that metric, going for 476 times forward earnings.
Bojangles’ stock? A forward P/E of 34 sounds much more reasonable.
Bottom Line
Don’t let today’s muted market reaction to Bojangles’ earnings deceive you: This is a solid company, and one with a feverish, cult-like following.
With BOJA stock refusing to trade higher despite an all-around Q1 beat, today looks more like a prime entry point than a selling signal.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
