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.