The Bottom Line:
- Majority of the stock market is down, presenting strong opportunities to buy undervalued dividend stocks.
- Today’s focus includes four lesser-known stocks near their 52-week lows with significant upside potential from Wall Street analysts.
- Papa John’s International shows mixed ratings but has a promising 3.86% forward yield and a history of double-digit dividend growth.
- Jack in the Box has experienced a 40% drop over the past year but shows potential for dividend increases and double-digit sales growth.
- Key financial metrics include free cash flow, debt levels, and margin safety, essential for evaluating long-term investment potential.
Unlocking Value in the Current Bear Market
Papa John’s International Analysis
The market cap for Papa John’s International is 1.57 billion, making it a small-cap company. The company has shown double-digit dividend growth over the last few years and has a forward yield of around 3.86%. Despite being down 36% in the last 12 months and only up about 10% in the last 10 years, Papa John’s has historically offered strong dividend increases.
Financial Metrics and Outlook
When looking at financial metrics, the free cash flow payout ratio was a red flag indicator in 2022 at 139%, but it is expected to come down significantly in 2023 and 2024. The free cash flow has been inconsistent over the years, with positive expectations for an increase in the future. Sales growth has been mixed, sometimes strong and sometimes low, with the top line increasing by around 50%.
Operational Performance and Debt Levels
Papa John’s return on invested capital (ROIC) has been inconsistent but generally positive, with recent years showing good performance. Operating margins have been inconsistent around 7-9%, and the net debt to EBITDA ratio is close to the upper end of what is considered ideal. The company has also engaged in share buybacks to return excess cash to investors.
Overview of Undervalued Dividend Stocks
Overview of Undervalued Dividend Stocks
The first stock we’re focusing on today is Papa John’s International, which currently sits near its 52-week low. Despite experiencing a 36% decline in the last 12 months and only a 10% increase over the past decade, Papa John’s has demonstrated strong dividend growth, with double-digit increases over the years. The company’s market cap is around 1.57 billion, classifying it as a small-cap entity.
Financial Insights and Future Prospects
Assessing the financial metrics, a concerning red flag was raised in 2022 with a free cash flow payout ratio of 139%; however, this is expected to decrease significantly in 2023 and 2024. The free cash flow has shown inconsistency in recent years, although there are positive expectations for future growth. Sales growth has been erratic, ranging from 3% to 7% typically, with a notable 50% increase in the top line.
Operational Performance and Debt Analysis
On the operational side, Papa John’s return on invested capital (ROIC) has been somewhat inconsistent but generally positive, with recent years demonstrating good performance. Operating margins have fluctuated around 7-9%, indicating some room for improvement. The net debt to EBITDA ratio is approaching the upper limit of acceptability, but the company has engaged in share buybacks to return excess cash to investors.
Papa John’s International: A Mixed Bag with Promising Yield
Stock Performance and Market Position
Papa John’s International, with a market cap of 1.57 billion, is currently trading near its 52-week low. Despite a 36% decline in the last year and only a 10% increase over a decade, the company has a history of robust dividend growth, showcasing double-digit increases consistently.
Financial Analysis and Growth Outlook
Examining financial metrics, a concern arose in 2022 regarding the free cash flow payout ratio at 139%. However, projections for 2023 and 2024 indicate a significant decrease in this ratio. Free cash flow has displayed inconsistency, but there are positive expectations for future growth. Sales growth, which typically ranges from 3% to 7%, saw a notable 50% increase in the top line.
Operational Efficiency and Debt Levels
In terms of operational performance, Papa John’s return on invested capital (ROIC) shows some fluctuation but generally positive trends, particularly in recent years. Operating margins hovering around 7-9% suggest room for improvement. The net debt to EBITDA ratio is nearing the upper limit of acceptability, yet the company has engaged in share buybacks to benefit investors by returning excess cash.
Jack in the Box: Overcoming a Rough Year
Jack in the Box: Overcoming Challenges
Jack in the Box, a company currently trading near its 52-week low, has faced a 40% decline over the past year. Despite this, it has a buy rating from Wall Street and a double hold rating from Seeking Alpha and Quant. With a yield over 3% and a low forward P/E ratio, the stock shows potential for growth.
Financial Strength and Outlook
Although Jack in the Box hasn’t increased its dividend in recent years, there are positive signs for the future. The free cash flow payout ratio has been consistently lower than 60% over the past decade, with an expected decrease in 2024. Additionally, free cash flow per share has doubled over the last 10 years, showing an increasing trend.
Operational Performance and Debt Management
The company has displayed both positive and inconsistent operational metrics. Return on invested capital (ROIC) has been somewhat irregular but generally positive. Operating margins have fluctuated around 7-9%, indicating room for improvement. Debt levels, while approaching the upper limit of acceptability, have been managed through share buybacks, returning excess cash to investors.
Key Financial Metrics: Evaluating Long-Term Investment Potential
Financial Insights and Growth Potential
Looking at the financial metrics for Papa John’s International, there were concerns in 2022 regarding the free cash flow payout ratio, but improvements are anticipated in 2023 and 2024. While free cash flow has shown inconsistency, there are positive expectations for future growth. The company experienced mixed sales growth, with a notable increase of about 50% in the top line.
Operational Performance and Debt Analysis
In terms of operational performance, Papa John’s return on invested capital (ROIC) has been somewhat inconsistent but generally positive, especially in recent years. Operating margins have been fluctuating, hovering around 7-9%, indicating some room for improvement. The net debt to EBITDA ratio is approaching the upper end of acceptability, but the company has engaged in share buybacks to return excess cash to investors.
