AFC Enterprises, Inc. (AFCE): Why This Fast Food Stock Is Worth a Look

The success of these promotions allowed Popeye’s to attain a 20% market share of the Chicken-QSR. It have also worked on drive through speed, recently achieving a consistent drive through time of 180 seconds in 70% of their store locations. With its focus on quality of food and service, the Popeye’s brand is steadily growing as seen by its improvement in same store sales.

The numbers back it up

AFC Enterprises, Inc. (NASDAQ:AFCE) has a market cap of $872 million, which is tiny compared to Yum! and McDonald’s who have market caps of $30.48 billion and $96.82 billion, respectively. While it is a small-cap business, other measures show that it is doing business right. AFC Enterprises’ current return on equity is 126.67%, showing high growth. Its revenue is $178.8 million, which yields net income of $30.4 million and diluted earnings per share of $1.24.

AFC Enterprises, Inc. (NASDAQ:AFCE) generated $11.5 million of free cash flow in the previous quarter which was used to convert restaurants acquired in 2012 and repurchase shares as a method of returning value to investors. Both are good uses of cash in my opinion.

AFC Enterprises expects high growth going forward. According to CEO Cheryl Bachelder, they expect in-store sales growth of 3%-4% and earnings per share to be between $1.37 and $1.42. They are also planning another share repurchase of $15 to $20 million.

Conclusion

Popeye’s is looking hotter than its chicken. AFC Enterprises, Inc. (NASDAQ:AFCE) is a solid business with massive growth potential that I don’t see slowing down any time soon. With the slow and negative growth seen by McDonald’s and Yum! brands, AFC Enterprises is clearly the fastest growing fast food operator out among them. Focusing on delivering quality food and service to customers worked for Popeye’s this past quarter and should continue to work in the future. With a current share price of around $35, I think AFC Enterprises, Inc. (NASDAQ:AFCE) is a good investment.

The article Why This Fast Food Stock Is Worth a Look originally appeared on Fool.com and is written by Ben Popkin.

Ben Popkin has no position in any stocks mentioned. The Motley Fool recommends McDonald’s. The Motley Fool owns shares of McDonald’s. Ben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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