Qdoba Will Take Jack in the Box Higher

While some of the biggest in the fast-food industry are finding growth a difficult game, Jack in the Box (NASDAQ: JACK  ) is firing on all cylinders. The drive-thru and dine-in business posted stellar earnings this week, with the bonus of strong forward guidance. It's not just burgers and fries driving sales, but the company's fast-growing Mexican concept: Qdoba. As evidenced by Jack in the Box along with much of the industry, Mexican-inspired quick food seems to be a no-brainer in today's fast-food landscape. While this certainly isn't a cheap stock, Jack in the Box may offer investors a cheaper way into the high-flying trend of U.S.-Mexican food.

Star of the show
On a systemwide basis, Jack in the Box's Qdoba property posted 7% same-store sales growth. The number isn't quite as impressive as the unyielding growth over at Chipotle Mexican Grill (which achieved more than 13% same-store growth in its recently ended quarter), but it still helped install Jack in the Box as one of the best-performing fast-food slingers around. The core brand moved slower but remained positive with 0.9% same-store sales growth.

Looking ahead, the story is much the same. Qdoba is projected to grow same-store sales 3%-4% in the fiscal third quarter (as opposed to 0.5% in last year's comparable quarter) and 3%-4% for the full year. Management is clearly excited at the strength of its high-performing asset, as it has plans for 50 new Qdobas this year alone.

As the company builds out its Qdoba business, the attractive growth will hold even more influence on the financials. Currently, there are more than 2,200 Jack in the Box locations, while there are only 600 Qdobas.

The New American
Mexican food -- or rather, Mexican-inspired food -- is more American than what we may consider to be American food. Last year, the Associated Press reported that there are more tortillas sold in the United States than buns, in addition to more tortilla chips than potato chips, and more salsa than ketchup. A quick glance at Yum! Brands' recent performance shows the continued strength of Taco Bell. In the meantime, traditional burger joint McDonald's is having trouble reenergizing its sales. High-flying Burger King is booking its growth from overseas, but U.S. store sales remain soft.

Though not without its competition, Jack in the Box's substantial exposure to the lucrative Mexican-inspired fast-food market is easily the most exciting thing about its business. Does that make the stock a buy?

Comparables
At more than 20 times forward earnings, Jack in the Box isn't a cheap stock, but it's definitely not the most outrageously valued. McDonald's trades at 16.3 times forward earnings, while Burger King commands a startling 22.5 times. Chipotle, as usual, leads the pack at more than 30 times forward earnings.

Jack in the Box's valuation appears to lean on the fairer side. It's growing much faster than McDonald's, and though Jack in the Box doesn't have the international boon that Burger King holds, the two companies have similar prospects. Qdoba isn't the growth megamachine that Chipotle is, but it trades at a substantial discount while still offering compelling long-term prospects.

The trend of Mexican fast food has been around for some time, but investors still have a chance to benefit from the industry tailwinds with this fairly priced option.

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