Papa John's Cools Off

At first glimpse, Papa John's (NASDAQ:PZZA) looks hotter than the molten cheese bubbling atop a freshly baked pizza. But bite deeper into the results, and things seem a bit more cold and rubbery.

The pizza chain's earnings per share soared 57%, from $0.30 to $0.47, in the first quarter. But a slightly closer look reveals that those numbers include a significant impact from the consolidation of BIBP, its franchise-owned cheese-purchasing entity. Without that cheese on top, earnings per share increased just 12%, to $0.37. Further examination reveals a 2005 charge that decreased earnings per share in its first quarter by $0.02. Excluding that charge, earnings per share grew by just 6% on the year.

In another case of reality contradicting appearances, the company reported an increase in cash flow from operations of $7 million to $25.7 million over last year. Once again, excluding the consolidation of BIBP, Papa John's cash remained at essentially the same levels as last year.

I don't mean to take anything away from the company's performance. After all, 12% growth -- or even 6% -- is nothing to sneeze at. However, it's a bit less impressive than the 57% growth initially implied in the earnings release. And while maintaining a level cash balance is certainly a positive, it's hardly the same as increasing operating cash by $7 million.

Let's move on to one of my favorite metrics, comparable sales, to see how Papa fared. For the quarter, the pizza maker increased its comparable sales in the U.S. by 4.2%. Compare that to Pizza Hut, a division of Yum! Brands (NYSE:YUM), and its 1% drop in comp sales for the quarter. In addition, Papa John's increased its April comps by 3.8%, marking 16 consecutive months of comps growth.

While Papa John's was pleased with its recent performance, it wasn't exactly raving about its results. It narrowed its guidance for the year but didn't feel compelled to raise the upper limit. It now expects to post earnings between $1.40 and $1.46 per share for the year. That gives it a forward P/E of about 21; again, that's decent, but no bargain.

Of the three leaders in this segment (Domino's (NYSE:DPZ) reports its results next), Papa John's is my favorite. While I agree with fellow Fool Rick Munarriz that Papa's ahead of the competition in the marketing department, I think it just comes down to the quality of the product.

That said, I can't bring myself to order a slice of Papa's stock right now. With projected growth between 4.5% and 9% for the year, I think the price is a bit too high. Its trailing P/E of 24 is significantly higher than Domino's 18. If you had the foresight to own it already, you've enjoyed a nice ride, but I just don't see enough growth potential to jump in at these levels.

Reheated Foolishness:

• Papa's Deepest Toss Yet
• Papa's Perfect Performance

Fool contributor Mike Cianciolo doesn't own shares of any company in this article.