Fast Food Restaurants

Papa John's International, Inc.

Papa John's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PZZA)") else Response.Write("(Nasdaq: PZZA)") end if %> has done very well operating in a tough market -- pizza. The company picks up on some of McDonald's enduring themes of quality, value, and service, and thus offers a very simple proposition to consumers. The menu is simple and Papa John's is quite direct about its strategy of becoming a very strong niche player. Its appeal to consumers can be found in its "hometown" taste, as its pizza dough is shipped fresh from the company's growing number of commissaries.

The simplicity of Papa John's concept -- essentially a kitchen, a counter, and a limited menu -- makes for exceptionally good gross margins on the restaurant operations, which are lessened by the near break-even performance of commissary operations. Taken as a whole, Papa John's financial performance is solid for a company that is plowing back so much of its earnings into growing the brand and supporting infrastructure. Judging by the P/E multiple on the stock, it appears as though investors believe year-over-year earnings growth rates of 50% and margin expansion can continue.

Latest Financials

For the second quarter ended June 29, 1997, Papa John's reported record revenues of $126.2 million and net income of $6.3 million. These results represent increases of 44% and 48%, respectively, over revenues of $87.7 million and net income of $4.2 million for the same period in 1996. Net income per share for the quarter increased to $0.22 compared to $0.15 for the second quarter of 1996, with 4% additional average shares outstanding in the current quarter.

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