Does Jack in the Box Inc. (JACK) Know Qdoba?

The company is complex to value considering the combination of a fast food hamburger chain and a fast-casual Mexican chain. Several analysts see the clean up of Qdoba as leading to the possibility of selling the division to eliminate some of the valuation issues that lead to the smaller multiples.

The previously mentioned chains easily swamp the comparative store count of the individual concepts. As an example, Chipotle operates nearly 1,500 restaurants and Wendy’s has over 6,500 stores in the US and 27 foreign countries. If the company were to only match the combination of Chipotle and Wendy’s, the over 8,000 stores would provide for nearly 200% gain in the store base alone.

Naturally no comparison exists between Jack in the Box Inc. (NASDAQ:JACK) and McDonalds that has over 34,000 locations around the world.

If the company were to only match the combination of Chipotle and Wendy’s, the over 8,000 stores would provide for nearly 200% gain in the store base alone.

Stock Chart

Investors have taken notice over the last year as the stock as easily outperformed this group. As the below chart highlights, the nearly 45% gain by Jack in the Box compares to on average a small net gain for the group:

Bottom line

The Qdoba closure news should leave investors questioning whether the company knows what its doing with that chain. Still, the company expects to increase operating earnings by $7 million or $0.15 based on 45 million shares outstanding. Ultimately if the company can show that the new and remaining Qdoba stores are able to generate strong margins, the long-term growth potential should continue pushing the stock higher as the chains have significant growth opportunities ahead.

Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and McDonald’s. The Motley Fool owns shares of Chipotle Mexican Grill and McDonald’s.

The article Does Jack Know Qdoba? originally appeared on Fool.com and is written by Mark Holder.

Mark 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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