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Zacks senior restaurant industry analyst Ann Northrop, CFA is reiterating her Buy recommendation this morning on shares of California Pizza Kitchen (CPKI). We took a look at her report to get the details:
'We are maintaining our Buy rating on California Pizza Kitchen. In our view, CPKI can grow earnings at a mid-teens rate over the next couple of years by adding full service restaurants in existing and new markets, increasing revenue (we estimate comps +3%) and restaurant margins through its new prototype restaurant design, and by further penetrating the fast casual market with the new ASAP concept.
'At 17.0x 2008E EPS, the stock is trading at a discount to our estimate of its longer-term 19% EPS growth rate potential. Our six-month price target incorporates a 17.8x multiple of forward earnings.
'The company grew its full service restaurant chain by 13 units or 9% in 2005, 16 units or 11% in 2006, and it expects to add another 17 units (10%) in 2007. With a chain of just 223 restaurants, we think the company can grow the units at about 10% while keeping an eye on profitability.'
Read the full analyst report on CPKI.
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