Short-sellers target Papa John’s; company tries to make mobile ads suck less

74420-PapaJohnsNo doubt about it, the short-sellers have come for Papa John’s. The Louisville-based pizza king saw the percentage of its stock shares that are short rise 15.7 percent in just a couple weeks. The total shares short went from 1.43 million as of Feb. 13 to 1.65 million as of Feb. 27 — the most recent date for which short figures are available. (You can get this data and more on PJ’s here.)

Now, short shares make up 5.3 percent of all PJ’s shares. This may not sound like a lot, but remember most people don’t play the shorts game. This can only mean that a decent percentage of the money following Papa John’s thinks it’s overpriced, and they’re betting on it. For comparison, another local food industry stock, Yum! Brands, only has 1.2 percent of its shares short. Generally speaking, when the percentage of shares short hits 10 percent, it’s like the biggest sell flag. So this is half that sell flag.

To find evidence that the Papa is an expensive stock, look no further than its price-to-earnings ratio: 36.4. This prices PZZA — their ticker — as a growth stock. That’s because the stock has had a great run. It’s up 14 percent in 2015 and 401 percent over five years, trouncing the Nasdaq index. But it’s priced like a tech stock when it’s still making pizzas — not exactly whiz-bang stuff. Meanwhile Apple, which makes actual whiz-bang stuff, has a PE of 17.7.

Papa John’s main competitor, Domino’s, is in much the same boat, by the way. Its percentage of shares short is 5.6 percent, and its PE ratio is 36.3.

In other Papa’s news, one of its marketing mavens took part in a discussion recently with other business bigwigs about how to make their respective mobile-based ads not suck.

The story comes to us courtesy of Mobile Marketing Daily, in which Jim Ensign, vice president of global digital marketing for Papa John’s, said the pie-stylists still haven’t quite figured out the online ad game, and its marketing team is working from the FOMO perspective, i.e., it has a “fear of missing out.”

“We throw so much crap at the wall … I worry we will kill the goose that laid the golden egg,” he said.

Finally, we get to some pure good news for PJ’s. The Temkin Group rated Papa John’s as giving the second-best customer experience in the fast-food game, right after Chick-fil-A.

Analyst: Ford is undervalued

Ford Truck

Ford Motor Co. might make a good car or truck — and they make many of those in Louisville — but over the long haul, it’s been a stock stuck in neutral. During the past year it’s up 6 percent, while the Standard & Poor’s 500 index, i.e. the markets, doubled that. Over five years it’s up 23.5 percent vs. 82 percent for the markets.

At present, the Blue Oval trades in the $16 range. But at least one Ford watcher thinks the stock is way undervalued.

Achilles Research says in a recent post on Seeking Alpha that Ford could be worth as much as $37 per share. For starters, the stock is a great dividend play, paying shareholders 3.7 percent a year just to own the shares. But the big reason to buy is that Ford has a lot of free cash. Specifically, it has a lot of what analysts call “free cash flow to equity,” which is the sum of its operating, investment and debt-related cash flows. The short version is that with companies, as in life, it’s generally good to have more cash.

Screen Shot 2015-03-19 at 10.13.38 AMAchilles estimates a value of $37 per share based on Ford’s current cash flows, factoring in moderate growth. The firm also says Ford should buy back a lot of its own shares with all its cash, which would reduce the number of shares in the market, driving up demand and price on those left. Achilles estimates Ford will “rake in” $10.3 billion in free cash to equity in 2015.

“Ford’s high free cash flows lead to an intrinsic value that is way above its current share price of $16,” they write. “Consequently, I think Ford … should follow General Motors’ lead here and announce a $10 billion share buyback to make better use of its cash. Ford can surely afford it.”

There are also high hopes for sales of the F-150 truck, which have slumped a little as Ford retools the lineup with lighter, more fuel-efficient aluminum bodies.