Another promising equity! JBX

[skindog]

For anyone not familiar, they run the Jack in the Box fast food chain out on the west coast.

I bought it a while ago at 39, sold at 63, and now I'm thinking of buying in again, in a big way.

I'm not gonna offer my detailed analysis (a few of you said my analyses suck anyway) but does anyone else think its relative valuation is a little bizarre/funny? Here's what I mean:

JBX, which has 2100 Jack in the Boxes (successful chain) AND which owns Qdoba (a 400 store mexican 'casual dining' chain) is worth 1.84B

CMG, which has 600 mexican 'casual dining' restaurants, is worth 3.39B

I understand the growth prospects for Chipotle yadda yadda, but the market is treating CMG as a monopoly in a fresh market and JBX/Qdoba as not even a blip on the restaurant radar.

400 vs 600 restaurants! The same product (I would even argue Qdoba is better, because of greater menu variety). FWIW Qdoba locations are popping up everywhere and are extremely popular.

I just don't understand. It's as if someone valued Pepsi as 1/15th the value of Coke. Discuss?

[soko]

I don't think JBX/Qdoba have the brand name. For example. I think JBX is better than McDonalds but I always wind up going to McDonalds at least 10 times per every time I go to JBX... Don't know why, McDonalds is just the first thing I think of when I think "Fast Food", I'm not really thinking quality I'm thinking HUNGRY>FOOD>McDonalds. Of course this perception could change, I've never stepped inside a Qdoba before and I love Chipolte and if the two stores were right next to each other I'd just go to Chipolte because I know the brand name.

[CardMinger]

skindog,

Pretty interesting idea...I also agree that something seems askew in the valuation but many things can affect the market cap of a company besides how many restaurants they own etc.

Maybe someone with more knowledge on valuing securities will chime in here and help out but I think you are definately on the right track.

I am also interested in your more detailed analysis fwiw.

Thanks for posting,
CM

[PRE]

It probably doesn't have great growth prospects. If you can do some analysis that shows otherwise, then I would buy it.

[skindog]

[ QUOTE ]
It probably doesn't have great growth prospects. If you can do some analysis that shows otherwise, then I would buy it.

[/ QUOTE ]

Well, that's sorta what I'm trying to figure out. Does anyone have a clue (besides the marketing so far) why Qdoba would have such discounted growth prospects compared to Chipotle?

As far as product goes, I can't think of any reason whatsoever. Management is all that comes to mind. I'm gonna do my own analysis, but I was hoping someone better at it would take a gander.

[PRE]

[ QUOTE ]
[ QUOTE ]
It probably doesn't have great growth prospects. If you can do some analysis that shows otherwise, then I would buy it.

[/ QUOTE ]

Well, that's sorta what I'm trying to figure out. Does anyone have a clue (besides the marketing so far) why Qdoba would have such discounted growth prospects compared to Chipotle?

As far as product goes, I can't think of any reason whatsoever. Management is all that comes to mind. I'm gonna do my own analysis, but I was hoping someone better at it would take a gander.

[/ QUOTE ]

Due a comp. sheet.

[AvivaSimplex]

I think this is a much more promising choice than your first two. You need to look beyond just the number of restaurants, though. For one thing, CMG has $150 million in net cash, and JBX has $400 million in net debt. There's also the issue of the quality of the restaurants' locations and the terms of the franchisee deals. It's like saying one company has 400 cars and the other has 600--the 400 could easily be worth 10x more than the 600.

The key for restaurant chains is that the parent company generally doesn't own most of the restaurants. They own the brand, which lets them make deals with independent franchisees. Depending on how those deals are structured, the parent company could make money selling ingredients, collecting license fees, etc. I don't know how they're done for these two companies, but that's something to find out if you want to value them.

Also, having Qdoba linked to Jack-in-the-Box is probably a bad thing--if they split apart, the two separate companies would probably be worth more in total than the current company. They're just aimed at different segments. I generally think of JitB as the lowest end of fast food, below McD and BK. Qdoba offers healthier food at a higher price and targets a more upscale crowd. Combining the two means that Qdoba's fast growth will be diluted by JitB. If burrito places grow at 25% annually while burger places stagnate, CMG will grow at 25%, and JBX will grow at 7%.