What: Shares of southern fried chicken and biscuits chain Bojangles' (NASDAQ:BOJA) lost 13.3% in June, according to S&P Capital IQ data. June marked the company's first full month of trading after a May 8th initial public offering (IPO).
So what: Based in Charlotte, NC, Bojangles' first opened its doors 38 years ago. The company's perceived stability, along with a revenue compound annual growth rate (CAGR) of 12.8% over the last four years, were among the factors contributing to a 25% rise on the stock's first day of trading from its offering price of $19 per share. Bojangles' shares peaked nearly three weeks later, on June 1, at $28.01.
During the month of June, the stock drifted downwards as some of the excess excitement was wrung out of the BOJA ticker:
Yet there appears to be a solid foundation for the initial excitement. Bojangles' pre-IPO "S-1" informational filing provided some interesting statistics that underscore the strength of the franchise. For example, $650,000 of the company's $1.8 million average unit volume (annual sales per restaurant) is derived from daily sales that occur before 11 a.m. Strength in the profitable breakfast daypart is a competitive advantage in an industry in which quick-service operators fight heavily to increase market share in the morning hours.
Another novel statistic revealed in Bojangles' informational filing concerns the composition of corporate versus franchised locations. While quick-service competitors such as Burger King (NYSE:QSR), McDonald's (NYSE:MCD), and Wendy's (NASDAQ:WEN) have been decreasing their number of corporate-owned stores in recent years in favor of heavily franchised models, Bojangles' actually added corporate stores at a faster rate than franchised locations over the last three years.
Corporate-owned stores, which presently number 254 out of 622 in total, have expanded revenue at a blistering 17.9% CAGR since 2011. Such performance and proof of the company's operational model is likely a selling point to future franchisees.
Now what: Though Bojangles' stock is down 13% from its peak, it currently trades at a level roughly equal to its debut pricing. At 34 times forward one-year earnings, the stock's valuation lies closer to fast-casual operators Chipotle (NYSE:CMG) and Panera Bread (NASDAQ:PNRA.DL) than it does its quick-service peers. But a business proven over decades and attractive revenue growth rates support at least part of this premium.
Current numbers bolster Bojangles' growth narrative. The company's first post-IPO quarterly report, issued on June 11, revealed a 19.2% rise in revenue versus the prior year quarter, and a 23% increase in net income after adjusting for the expense of going public.
It appears that June's stock decline is a function of Bojangles' shares settling into an initial trading range, and we'll likely have a better sense of pricing over the next few quarters.
Asit Sharma has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread. 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.