Jack in the Box Inc Valuation – Initial Coverage $JACK

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Jack in the Box Inc (JACK) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Jack in the Box Inc. operates and franchises Jack in the Box quick-service restaurants (QSRs) and Qdoba Mexican Eats (Qdoba) fast-casual restaurants. The Company operates in two segments: Jack in the Box and Qdoba restaurant operations. Qdoba is a fast-casual Mexican food brand in the United States, offering food items including burritos, tacos, salads, and quesadillas. Jack in the Box is a hamburger chain, which offers a selection of products, including classic burgers such as, Jumbo Jack burgers, and new product lines, such as Buttery Jack burgers, and its Brunchfast menu. As of October 2, 2016, the Company operated 2,954 Jack in the Box QSRs and Qdoba fast-casual restaurants. As of October 2, 2016, Jack in the Box system included 2,255restaurants, of which 417 were company-operated and 1,838 were franchise operated. As of October 2, 2016, the Qdoba system included 699 restaurants, of which 367 were company operated and 332 were franchise operated.

JACK Chart

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of JACK – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,455,946,564 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.56 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 106.02% Pass
6. Moderate PEmg Ratio PEmg < 20 31.84 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -16.97 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.56 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -7.55 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $3.39
MG Growth Estimate 15.00%
MG Value $130.52
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $49.16
MG Value based on 0% Growth $28.82
Market Implied Growth Rate 11.67%
Current Price $107.93
% of Intrinsic Value 82.70%

Jack in the Box Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.35 in 2013 to an estimated $3.39 for 2017. This level of demonstrated earnings growth supports the market’s implied estimate of 11.67% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Jack in the Box Inc. revealed the company was trading above its Graham Number of $0. The company pays a dividend of $1.2 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 31.84, which was above the industry average of 31.3. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-41.31.

Jack in the Box Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$41.31
Graham Number $0.00
PEmg 31.84
Current Ratio 0.56
PB Ratio -16.97
Current Dividend $1.20
Dividend Yield 1.11%
Number of Consecutive Years of Dividend Growth 4


Useful Links:

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $155,405,000
Total Current Liabilities $279,560,000
Long-Term Debt $937,512,000
Total Assets $1,348,791,000
Intangible Assets $180,088,000
Total Liabilities $1,565,997,000
Shares Outstanding (Diluted Average) 34,146,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.48
Sep2016 $3.63
Sep2015 $2.85
Sep2014 $2.12
Sep2013 $1.14
Sep2012 $1.28
Sep2011 $1.61
Sep2010 $1.26
Sep2009 $2.05
Sep2008 $2.01
Sep2007 $1.87
Sep2006 $1.49
Sep2005 $1.21
Sep2004 $0.99
Sep2003 $0.95
Sep2002 $1.00
Sep2001 $1.03
Sep2000 $1.28
Sep1999 $0.98
Sep1998 $0.83
Sep1997 $0.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.39
Sep2016 $2.63
Sep2015 $2.02
Sep2014 $1.57
Sep2013 $1.35
Sep2012 $1.52
Sep2011 $1.68
Sep2010 $1.72
Sep2009 $1.87
Sep2008 $1.69
Sep2007 $1.46
Sep2006 $1.21
Sep2005 $1.06
Sep2004 $1.01
Sep2003 $1.02
Sep2002 $1.05
Sep2001 $1.02

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

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McDonald’s Corp Valuation – November 2016 $MCD
Chipotle Mexican Grill Inc Valuation – August 2016 $CMG
Yum! Brands Inc Valuation – August 2016 $YUM
Starbucks Corp Valuation – June 2016 $SBUX
McDonald’s Corporation Valuation – May 2016 $MCD
Chipotle Mexican Grill Inc Stock Valuation – February 2016 $CMG
McDonald’s Corporation – November 2015 Update $MCD
Chipotle Mexican Group Inc Valuation – November 2015 Update $CMG


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.






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