No. of Recommendations: 0
Hi CapitalAlligator, I apologize for not having time to reply as thoroughly as I'd like. But I agree with all your points.
The short interest really troubles me. As you noted, with PZZA having a 5% yield, it is an expensive short. I think they are factoring in a suspension or cut in the dividend. I think the strongest reason for the short case, as you also noted, is debt related; they have $17M cash on hand and the same aggregators say $1B in debt. They are paying $45M annually for the common stock dividend and their past buybacks were badly timed and indicate poor judgement. The CEO transition doesn't help.
But that is why - to me, at least - an otherwise decent chain costs 12-15 times earnings and 9 EV/EBIDTA. I think they are fixable and have room to grow. For various reasons I also tend to like companies that pay substantial dividends (BRK notwithstanding), which PZZA would be even if it halved theirs.
Regarding debt, they have $400M at 3.875% maturing in 2029 and $332.4M on their revolving credit facility with $273.2M left per the last 10-Q (
https://ir.papajohns.com/financials/sec-filings/co...). It sounds like they are meeting their credit covenants currently.
I think PZZA is a risky choice, though, and wouldn't want to persuade others to follow me.
Like homosapien, I also have picked up a small HSY position, and I'm worried I have tunnel vision with a couple of falling knives and might be missing the reasons for industry-wide headwinds that should make me reevaluate. I don't know what those might be, unfortunately. GLP-1 agonists? Economic softness? Tariff related inflation?
I truly asked out of plain old curiosity and ignorance.
