Bojangles as a stock

We like Bojangles...for food.  Their biscuits are unbeatable, their chicken we understand is lights out compared to other offerings, and yes they know how to brew some seriously good iced tea.  We even know some Yankees, and even some damn Yankees, who came south and can be found regularly at their restaurants.  Most of their customers literally crave this food. Heck we love their food and really like our local Bojangles and their crew.  With that said we are not so sure about their stock. 

Do not get us wrong here the company is well managed, maybe as well managed as any fast food business out there.  We love their concept and the business model.  We honestly think some of their restaurants are the best run and most pleasant places to dine we know, with the exception of some of those Down East NC. (Are you listening Mr. McRae?)  Absolutely love the use of what we consider a best business practice of selling at the price that generates the most sales possible and not at the price that is trying to make the most profit per sale. KFC is being pushed hard by Bojangles to reorganize their business to compete.  Those that think Popeyes will a better operator are wrong too, even though we really really think Popeyes is running a darn fine company too. With that said we are not so sure about their stock. 

The stock is selling around $26 as we speak and that is our best guess around a 35 PE, which is rich even for a good growing business.  The price ran up higher earlier on this month after the IPO and that was expected as those who hold stock in index funds who must buy this stock bought in.  Lately it has settled down a bit and we are waiting for the first ever earnings report which should come in about one week.  Now most new IPO's make sure, make real sure, that first post IPO earnings report is a sweet one.  You know cut expenses, shift costs, and push forward some revenue to hold up that stock price sooner rather than later. We spent a good bit of time reading their IPO and liked what we read, we will likely spend some time reading their earning report too.  But we believe this will be a show me stock in the ultra competitive world of the food business. Remember it is not what YOU think or even how the business does with stocks like these, it is how Wall Street thinks that could cause a buying of the shares and push up the price for the first few cycles. 

Also note that Bojangles did not get any proceeds form their IPO, it was a selling of some of the internal shareholders wanting some cash from their current holdings.  That is good that there was no dilution of the shares, but is is bad that Bos did not get any cash to expand store footprint.  I would not be surprised to see something like a secondary offering soon to do just that and that might come shortly after a good earnings report at some point. That will likely depress the shares and that might offer an opportunity to get in cheaper.  We would like it under $25 and would much prefer under say $22 or so.  But this is a speculative stock, not a swing for the fences stock. 

So be careful, and be patient here with BOJA.  Risk happens fast.