We came across a bullish thesis on Jack in the Box Inc. (NASDAQ:JACK) on Substack by Christopher Kirincic. In this article, we will summarize the bulls’ thesis on JACK. Jack in the Box Inc. (NASDAQ:JACK)’s share was trading at $40.47 as of Jan 6th. JACK’s trailing and forward P/E were 9.05 and 7.54 respectively according to Yahoo Finance.
Jack in the Box (NASDAQ:JACK), a West Coast-based quick-service restaurant (QSR) chain, has been experiencing a challenging year in 2024, yet it remains a compelling investment opportunity going into 2025. Despite facing headwinds from inflationary pressures on its core low-income customer base and wage increases in California—where approximately 45% of its locations are situated—JACK is positioning itself for a strong rebound. The company, which acquired Del Taco in March 2022, continues to focus on expanding its footprint, modernizing kitchens, and enhancing its digital ordering and delivery capabilities. The introduction of new locations, including an expansion into Chicago in 2025, signals confidence in its long-term growth prospects.
While the stock has underperformed recently, JACK’s management is actively addressing these challenges, investing significantly in capital expenditures aimed at improving operational efficiency and technological advancements. Despite these pressures, JACK’s long-term growth story is compelling due to its solid cash flow generation, capital returns to shareholders, and growing customer base. Although 2024 has been marked by non-recurring losses—such as an $8 per-share goodwill impairment related to the Del Taco acquisition—the company’s long-term performance remains strong. Adjusting for these factors, JACK is expected to generate approximately $5.95 in earnings per share (EPS) in 2025, with a margin of safety built into the estimate.
JACK’s solid financial track record, marked by 80-100% growth in sales, EPS, and cash flow over the past decade, highlights the value the company is currently trading at. The stock’s total return has lagged behind the growth in its key financial metrics, making it a potentially undervalued investment. The company is expected to generate nearly $10 per share in operational cash flow, with plans to deploy $6 per share into capital spending, ensuring future growth and leaving ample free cash flow to service a 4.3% dividend yield.
Looking ahead, analysts project that JACK will see steady EPS growth of approximately 9% annually through 2029, even factoring in challenges in the near term. The company’s stock has historically traded at an average price-to-earnings (P/E) multiple of around 17x, and applying this multiple to revised earnings estimates suggests a target price of $123 by 2029, a significant upside from the current stock price of ~$40. Despite Wall Street analysts’ conservative targets, JACK’s attractive valuation, strong cash flow generation, and growth potential make it a solid investment opportunity, with a high likelihood of price appreciation in the next 12-18 months.
Jack in the Box Inc. (NASDAQ:JACK) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held JACK at the end of the third quarter which was 16 in the previous quarter. While we acknowledge the risk and potential of JACK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than JACK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.