Jim Cramer Notes “It’s a Wait-and-See Situation With Penegor at Papa John’s”

Papa John’s International, Inc. (NASDAQ:PZZA) is one of the 18 stocks Jim Cramer recently shared insights on. A caller asked about the company during the lightning round, and Cramer replied:

“You know, Papa John’s, only six ingredients in a Papa John’s pizza. I find that quite incredible. Todd Penegor runs it now. You know, the previous CEO went on to Shake Shack. He’s crushing [it] at Shake Shack. I think it’s a wait-and-see situation with Penegor at Papa John’s, so I’m not going there yet. I’m not saying yes.”

A family gathering around a delivery pizza box in the comfort of their own home.

Papa John’s (NASDAQ:PZZA) operates and franchises pizza restaurants offering delivery, carryout, and dine-in services. The company also supplies ingredients, packaging, and equipment to its locations. River Road Asset Management stated the following regarding Papa John’s International, Inc. (NASDAQ:PZZA) in its Q4 2024 investor letter:

“The holding with the lowest contribution to active return in the portfolio during Q4 was Papa John’s International, Inc. (NASDAQ:PZZA), the third-largest pizza delivery company in the world. Early in the quarter, the stock rallied on speculation it was going to be acquired by Restaurant Brands International (QSR), owner of Tim Hortons®, Burger King®, and Popeyes®. However, when a deal did not materialize the stock sold off into year-end. During the quarter, PZZA held an Investor Day where management highlighted recent progress on operational improvements, new unit growth, and franchisee profitability. New store build costs are down -20% to $500k and the average franchisee generates $150k in annual earnings before interest, taxes, depreciation, and amortization (EBITDA), indicating payback periods of less than four years and an attractive unlevered cash-on-cash return for franchisees, which should bode well for unit growth. Additionally, of the top 20 largest franchisees in the system, 80% have new store development agreements in place. The commissary business should continue to increase margins at 100 bps annually to 8%, bringing it in-line with competitor Domino’s®. This should incentivize franchisees to drive transaction growth as they will receive volume rebates. Overall, we are encouraged by these developments and believe the company is still significantly undervalued relative to its closest public peers. If management successfully executes these initiatives, we anticipate the valuation gap will close. We trimmed the position during the quarter.”

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