Source:  Wikimedia Commons

I still remember the first time I curiously popped into a Popeyes Louisiana Kitchen (NASDAQ:PLKI) about a decade ago. It looks kind of like a Yum! Brands' (NYSE:YUM) KFC, has a menu similar to that of KFC, and is even named after a state like KFC. How different could it be? Well, what a treat! But this isn't about my taste buds. The numbers suggest that others are rapidly joining me in my cult-like addiction. Needless to say: Yum! Brands might just be in trouble.

The tender and juicy results
On May 28, Popeyes Louisiana Kitchen reported fiscal first-quarter results. During the same period when Yum! Brands complained of "unusually severe weather" for the US, Popeyes Louisiana Kitchen reported that its revenue leaped 16.1% to $70.1 million. Revenue for company-owned restaurants soared 23%. Same-store sales jumped 4.5% this year for a two-year jump of 9%. Adjusted net income lifted 15% to $11.1 or $0.46 per diluted share.

Compare that to Yum! Brands' KFC outside of China. Yum! Brands reported for its first quarter that KFC sales in the US slipped 4% while same-store sales lost 3%. There were pockets of strength in tiny markets such as Russia where KFC sales did explode by 47%, but international KFC same-store sales excluding China fell back by 1% overall.


Source: Wikimedia Commons

Giving the other guys a lickin'
Cheryl Bachelder, CEO of Popeyes Louisiana Kitchen, credited the company's success to its "freshly remodeled restaurants, superior food at sharp price points, and national advertising," Popeyes has now outpaced its chicken-segment competitors in terms of same-store domestic sales growth for 24 quarters in a row. The company now boasts 22.3% of the market compared to 20.2% last year.

In light of the results, Popeyes raised its guidance. It had originally projected 2%-3% growth in same-store sales for 2014 and upped that to 3%-4% growth. It raised its adjusted earnings-per-share guidance by a penny on the low and high ends to between $1.58-$1.63. It plans to expand its restaurant count by 5% this year.

Popeyes is popping up everywhere
Over the long term, for the next five years Popeyes targets annual same-store sales growth of 1%-3%, net unit growth of 4%-6%, and earnings-per-share growth of 13%-15%. I know what you're thinking. It sounds like the company is low-balling it on purpose, at least a little.

Now consider this. Normally it's tempting to dismiss rapid growth numbers from a smaller competitor because it's generally easier to grow from a smaller number. Yum! Brands owns nearly 19,000 KFCs around the globe with around 4,500 in the U.S. Popeyes has significantly fewer locations with only around 2,200 worldwide.

But the average sales of a US Popeyes location in 2012 were 30% higher than those of an average KFC. Ironically, KFC is actually the smaller player when it comes to same-store sales growth. True, there probably is a little bit of cannibalization when it comes to KFC. But not 30%. This number suggests at the very least that Popeyes may be more popular in its markets than KFC. That further suggests a lot of upside opportunity for Popeyes.


Source: Wikimedia Commons

Foolish final thoughts
Using the guidance numbers from Popeyes Louisiana Kitchen and the current share price, it trades at a P/E of around 28 for this year. At first it looks a bit pricey compared to Yum! Brands, which trades at at a P/E of around 21 based on its current share price and analyst estimates for the fiscal year ending December 2014. However, with such a relatively small store count, faster growth, and higher sales on an individual store level Popeyes seems like it's just getting started compared to Yum! Brands.

Using the midpoint of its guidance, Popeyes should double its earnings per share over the next five years and certainly has potential to do much better than that considering that the company just raised guidance for its next quarter. Popeyes deserves a closer look from patient Fools because if it continues on this path over the very long term it could command a fundamental value multiple times higher than its current one.

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Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.