Critical Review: Jack In The Box (JACK) and Papa Murphy’s Holdings (FRSH)

Jack In The Box (NASDAQ: JACK) and Papa Murphy’s Holdings (NASDAQ:FRSH) are both retail/wholesale companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, profitability, risk, institutional ownership, dividends, valuation and earnings.

Volatility & Risk

Jack In The Box has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500. Comparatively, Papa Murphy’s Holdings has a beta of 0.05, indicating that its share price is 95% less volatile than the S&P 500.

Earnings & Valuation

This table compares Jack In The Box and Papa Murphy’s Holdings’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Jack In The Box $1.61 billion 1.90 $350.23 million $4.36 23.86
Papa Murphy’s Holdings $125.10 million 0.75 $16.53 million ($0.63) -8.78

Jack In The Box has higher revenue and earnings than Papa Murphy’s Holdings. Papa Murphy’s Holdings is trading at a lower price-to-earnings ratio than Jack In The Box, indicating that it is currently the more affordable of the two stocks.

Dividends

Jack In The Box pays an annual dividend of $1.60 per share and has a dividend yield of 1.5%. Papa Murphy’s Holdings does not pay a dividend. Jack In The Box pays out 36.7% of its earnings in the form of a dividend.

Institutional & Insider Ownership

96.1% of Jack In The Box shares are held by institutional investors. Comparatively, 36.0% of Papa Murphy’s Holdings shares are held by institutional investors. 2.1% of Jack In The Box shares are held by insiders. Comparatively, 3.1% of Papa Murphy’s Holdings shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Jack In The Box and Papa Murphy’s Holdings, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Jack In The Box 1 3 10 0 2.64
Papa Murphy’s Holdings 0 4 0 0 2.00

Jack In The Box presently has a consensus target price of $113.38, suggesting a potential upside of 8.99%. Papa Murphy’s Holdings has a consensus target price of $4.75, suggesting a potential downside of 14.10%. Given Jack In The Box’s stronger consensus rating and higher probable upside, equities analysts clearly believe Jack In The Box is more favorable than Papa Murphy’s Holdings.

Profitability

This table compares Jack In The Box and Papa Murphy’s Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Jack In The Box 8.51% -37.83% 10.39%
Papa Murphy’s Holdings -8.43% 3.16% 1.15%

Summary

Jack In The Box beats Papa Murphy’s Holdings on 12 of the 16 factors compared between the two stocks.

About Jack In The Box

Jack in the Box Inc. operates and franchises Jack in the Box quick-service restaurants (QSRs) and Qdoba Mexican Eats (Qdoba) fast-casual restaurants. The Company operates in two segments: Jack in the Box and Qdoba restaurant operations. Qdoba is a fast-casual Mexican food brand in the United States, offering food items including burritos, tacos, salads, and quesadillas. Jack in the Box is a hamburger chain, which offers a selection of products, including classic burgers such as, Jumbo Jack burgers, and new product lines, such as Buttery Jack burgers, and its Brunchfast menu. As of October 2, 2016, the Company operated 2,954 Jack in the Box QSRs and Qdoba fast-casual restaurants. As of October 2, 2016, Jack in the Box system included 2,255restaurants, of which 417 were company-operated and 1,838 were franchise operated. As of October 2, 2016, the Qdoba system included 699 restaurants, of which 367 were company operated and 332 were franchise operated.

About Papa Murphy’s Holdings

Papa Murphy’s Holdings, Inc. is a holding company. The Company, together with its subsidiaries, is a franchisor and operator of the Take ‘N’ Bake pizza chain in the United States. The Company franchises the right to operate Take ‘N’ Bake pizza franchises and operates Take ‘N’ Bake pizza stores owned by the Company. The Company operates through three segments: Domestic Company Stores, Domestic Franchise and International. Its Domestic Franchise segment consists of its domestic franchised stores, which represent its system-wide stores and derives its revenues from franchise and development fees and the collection of franchise royalties. The Domestic Company Stores segment consists of its Company-owned stores in the United States and derives its revenues from retail sales of pizza and side items to the general public. Its International segment consists of its stores outside of the United States, all of which are franchised and derives its revenues from franchise and development fees.

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