We recently published a list of 8 Cheap Restaurant Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Jack in the Box Inc. (NASDAQ:JACK) stands against the other cheap restaurant stocks to buy.
Soaring ingredient prices, operating expenses, and tipping fatigue have pressured the restaurant industry over the last few years. According to a report by National Public Radio (NPR) in August, the price of grocery items in the U.S. has grown 19% since the mid-2020s, compared to the cost of restaurant meals, which have risen by nearly 24%.
READ ALSO: 10 Best Restaurant Stocks To Buy According to Analysts and 11 Best Fast Food Stocks To Invest In Right Now.
This has resulted in a shift in consumer preferences as Americans become more cautious about where they spend their money. A survey by Lending Tree in May 2024 has revealed that 78% of Americans now consider fast food, which is integral to American culture, a ‘luxury’, forcing them to reassess their spending habits. Around 72% of the respondents said that they prefer having fast food during discount hours because of surge pricing in restaurants.
Despite the headwinds, it is not all lost for the restaurant industry, which continues to remain resilient, driven by the common desire among Americans to dine out. A critical factor that keeps the market thriving is how well it adapts to changing consumer preferences and price sensitivities. Several notable restaurant chains have been offering value deals, new menus, and discounts to lure customers during the holiday season.
Restaurants are also increasingly adopting automation in their quest for operational efficiencies and cost savings in an industry with thin margins. While the initial investment in technology is substantial, restaurant owners are hopeful that these upfront expenditures will enhance customer experience, reduce labor costs, and even be a solution to the challenges associated with labor shortages.
Despite facing temporary challenges, restaurant stocks have maintained strong performance this year. A restaurant ETF issued by AdvisorShares had gained 32.10% year-to-date as of the close of day on November 29, outperforming the broader market by just under six percentage points. According to data from the U.S. Census Bureau, food services and drinking places in October saw a 4.3% increase in sales compared to the same period last year.
The downturn in inflation is also a positive indicator for the industry. Consumer prices have eased down from the peak of 9.1% in June 2022 to 2.6% in October 2024. Interest rate cuts are also expected to boost the restaurant industry, as the low cost of borrowing would allow owners to go ahead with their expansion plans and also encourage consumer spending.
The front counter of the restaurant, with the menu illuminated in the background.
Our Methodology
We sifted through screeners to identify restaurant stocks with a forward P/E ratio of under 16 as of the close of the day on November 25, 2025. From there, we selected the 8 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 900 prominent hedge funds as of Q3 2024. The 8 cheap restaurant stocks have been ranked in ascending order of the number of hedge funds holding stakes in them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Jack in the Box Inc. (NASDAQ:JACK)
Forward Price to Earnings Ratio: 8.93
Number of Hedge Fund Holders: 16
Jack in the Box Inc. (NASDAQ:JACK) is an American restaurant company specializing in quick-service food. The hamburger giant operates around 2,200 restaurants across 22 states. It also owns Del Taco, a Mexican fast-food chain with more than 600 restaurants nationwide.
Rising labor costs, a surge in ingredient prices, and changing consumer preferences amid rampant inflation have pressured JACK’s financial performance this year, resulting in its share price dropping by 40% year-to-date.
During its recent Q4 2024 earnings call on November 20, the company reported a drop in same-store sales for both Jack in the Box and Del Taco. Consolidated adjusted EBITDA for the quarter was $65.5 million, down 4.2% compared to the same period last year because of the impacts of lower sales and Del Taco re-franchising. The company was also pushed by the new minimum wage regulation in California, which further drove up its labor costs.
Despite a dip in sales, Jack in the Box Inc. (NASDAQ:JACK) is undergoing robust expansion. The company opened 16 new locations during the quarter, with plans to enter the Florida market in fiscal year 2025. There have been 30 new Jack openings for the full year, the highest number in over a decade. JACK is also witnessing impressive digital sales growth (14% in Q4), which bodes well for the company’s efforts to improve to increase its loyalty guest base.
Cash flow from operations stood at $29.6 million in Q4 and $68.8 million for the full year. Capital expenditures, which include digital initiatives and investments in technology, were $29.7 million for the quarter and $115.5 million for the full year. Jack in the Box Inc. (NASDAQ:JACK) is also returning cash to shareholders through dividends and share repurchases. On November 14, the Board declared a cash dividend of 44 cents per share to be paid on December 30. For FY 2024, it repurchased approximately 1.1 million shares for $70 million.
Overall, JACK ranks 5th on our list of cheap restaurant stocks to buy according to hedge funds. While we acknowledge the potential of restaurant companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. 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 is originally published at Insider Monkey.
