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Jamba (Nasdaq: JMBA  ) has been a surprisingly popular investment this year.

The stock has roughly doubled so far in 2012, and last week's quarterly report confirmed the bullish thesis.

On the surface, the second-quarter financials for the Jamba Juice parent may not seem all that inspiring. Revenue climbed 12% to $66 million, but this year's fiscal quarter included an extra week. Pitting the 13 weeks this time around against the same weeks a year earlier results in pro forma revenue climbing by less than 4%. On the profitability front, Jamba's net income of $0.05 a share fell short of the $0.07 EPS that analysts were targeting.

However, let's take a deeper dive here.

Into the blender we go
Jamba isn't a revenue-growth story these days. It's been busy handing over many of its company-owned stores to successful franchisees. The end result is a drop in revenue, but a welcome increase in net margins as royalty fees trickle in without a lot of related overhead.

If we look at the concept itself, Jamba Juice is rocking. Same-store sales climbed 5.1% at company-owned stores and a heartier 6.4% at franchise-operated locations. The spike in comps is the result of both an increase in foot traffic and customers spending more per visit. This isn't a fluke. Comps at franchise-owned stores have moved higher for eight consecutive quarters.

Go back in time two years to the start of the streak and you'll discover that it's just around the time that McDonald's (NYSE: MCD  ) introduced smoothies to its McCafe menu. The newly public Burger King Worldwide (NYSE: BKW  ) added smoothies to its menu earlier this year. Starbucks (Nasdaq: SBUX  ) has been blending up smoothies for a bit longer than that, but it turned heads several months ago by acquiring a juice company that also offers smoothies.

In other words, the quick-service behemoths aren't a threat to Jamba. Mickey D's and Starbucks are actually educating consumers about the merits of vitamin- and nutrient-rich fruit beverages.

So why are comps higher than pro forma revenue growth? Is the concept shrinking in popularity? No. There are 31 more stores now than there were a year ago. The difference -- again -- is that many company-owned stores are now in the hands of franchisees.

There's fruit on the bottom
It's not just the big chains getting the word out on the benefits of chilly fruit drinks. Jamba is doing some educating of its own. There are now 130 JambaGo installations in school cafeterias around the country offering packaged juice drinks and pre-blended smoothie dispensers. Jamba is targeting 400-500 of these licensed outlets for self-service cafeterias to be set up by the year's end, and a whopping 1,500 units by the end of next year.

JambaGo outlets will never generate the kind of revenue that full-service stores can deliver, but think about the branding power that will be magnified tenfold by the end of next year. Hundreds of thousands of students will be exposed to the Jamba brand on a daily basis at lunch. Jamba may be taking advantage of the trend for schools to offer healthier food and drink choices as a way to sell its goods, but this is ultimately going to make Jamba Juice even more ubiquitous as an active lifestyle brand.

Jamba's profit of $0.05 a share may seem disappointing during a seasonally potent quarter, but we're actually talking about a 37% increase in operating income and a 26% uptick in net income on a pro forma basis. That's some pretty encouraging margin expansion when pro forma revenue only inched 4% higher.

Jamba's franchising model is being validated, and it won't be long before JambaGo, the relaunch of its retail-ready energy drinks, and the recent Talbott Teas acquisition begin building on the brand's potential.

Blended just right
Two of the companies in a new report detailing three American companies set to dominate the world are eateries. Jamba isn't one of them, but you can find out the two that are for free. Check out the report now.

The Motley Fool owns shares of McDonald's and Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks and McDonald's. Motley Fool newsletter services have also recommended writing covered calls on Starbucks. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He  owns shares in Jamba. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (4) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 07, 2012, at 10:18 AM, MrViklund wrote:

    Starbux acquisition of Evolution Fresh might make sense on some level but it's an admission that their core business is slowing and that does not intrigue me at all.

    Second of all.

    I thought Starbux acquisition of Evolution Fresh was a little bit strange. Because you should not mix Coffee and Juice. You should not drink Coffee within 30 minutes of drinking Juice or the vitamins in the Juice will have no affect. I'm a little bit surprised that no one have mentioned this at all. I have not seen it in any article or mentioned on TV. It won't spell doom on the company, of course not but it seems people are unaware of the fact.

  • Report this Comment On August 07, 2012, at 9:06 PM, Risingstock wrote:

    This stock will rise ! Mc Cafe has done a great job with coffees etc ( no one ever thought this would happen)

    Mc Cafe can serve Jamba Juices

    Maybe not the completed offerings , Mc Cafe has the consumer traffic the frame to serve healthy products ,and Mc has the cash and logical desire to buy Jamba , what ever it takes , The store leases become to expensive integration with Mc brings synergies benefitting Mc and the Consumer.

  • Report this Comment On August 08, 2012, at 11:08 AM, mkrusi wrote:

    I am concerned with Jamba's profits. They have been discounting heavily. They currently have a $1 Smoothie promotion which is below their cost of goods sold. Last week they extended their BOGO sale which was selling smoothies at cost.

    McDonalds and BK have made inroads into the smoothie business similar to what Walmart has don't to SuperValue, Safeway and other grocery stores. Jamba will have a strugle in selling $5 Smoothies, so I am selling short.

  • Report this Comment On August 08, 2012, at 12:20 PM, mkrusi wrote:

    I am concerned about Jamba's Employement practices, can someone clarify?

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