Re FRSH - I live close to Petaluma, the town where Murphy's Pizza got started, which later merged with Papa to form Papa Murphy's. Where I live, there are quite a few franchises and at least the one close to my house is well managed and reasonable busy.
We started perusing them when we had our son and going to a restaurant became a drag, So I second what Gizwick stated, that their business model is not just cheaper, but more convenient for many people. A think that FRSH fills a most likely growing niche in the restaurant like business ( it is really prepared food not a restaurant, which saves customers VAT tax in addition to the tips, which adds up quite a bit). They also have by far the best name recognition in their respective business.
You get all this for 160M$ market cap or ~250M$ EV. In the last quarter, they blew out my expectations and that is why I bought the stock. I think they are on par to generate 27M$ in EBITDA and they should show high single digit topline growth (roughly adding 100 franchises and a few % SS growth should do the trick. I think we saw some indication in the last quarter, that the bottom line starts to show way more growth than the topline due to leveraging the fixed cost structure and because they franchise 95%+ of their stores. You get the idea when comparing the 5.5M$ topline growth to the 1.9M$ bottom line growth, which means that ~35% of the incremental revenue dropped to the bottom line. This is the reason why I think FRSH earnings could go "hockey stick" even with moderate topline growth.
I am not sure I would call FRSH a value stock at this point, but I think it is undervalued relative to it's potential. |
