Is Investing in Jubilant Food Shares Worth It: Hold or Sell?
As the world recovers from the grip of the pandemic, investors are faced with the question: Should you continue to hold or consider selling your shares in Jubilant FoodWorks Ltd., a major player in the pizza and quick service restaurant (QSR) segment through its well-loved brand, Domino’s Pizza. To provide insights, I conducted an Instagram poll, with the results showing a strong inclination towards retaining Domino’s over other pizza shops. This article delves into the financial health of Jubilant FoodWorks, including market capitalization, earnings, and peer comparisons, helping you make an informed decision.
Market Capitalization and Enterprise Value
One of the first things to note is the market capitalization and enterprise value of Jubilant FoodWorks. These metrics are almost the same, indicating a well-balanced company. However, there are some red flags that need to be acknowledged.
Price-to-Earnings (P/E) Ratio
The P/E Ratio of Jubilant FoodWorks is exceptionally high at 248.79 (as of 21st April 2021), suggesting that the stock may be overvalued. This is a cautionary sign for investors considering short-term gains.
Return on Equity (ROE) and Return on Capital Employed (ROCE)
In terms of ROE, the metric appears to be quite volatile, but the three-year average is promising. Meanwhile, ROCE is showing steady and high growth, indicating a stable return on the company's capital employed. This is a positive signal for both the company and its investors.
Profit and Loss Statement Analysis
The company's annual performance reflects a consistent increase in both sales and net profits. Total expenditure has remained steady despite the rise in sales, suggesting robust margins. The EPS (Earnings Per Share) also shows a positive year-over-year (Y-o-Y) growth, except for a downturn in 2020 due to the global pandemic. This year, the company is recovering, and the trends indicate underlying strength.
Peer Comparison
When compared with its peers, Jubilant FoodWorks has the highest P/E ratio. However, its P/S (Price-to-Sales) ratio is relatively average, which is a positive attribute. The key strength of Jubilant FoodWorks lies in its flagship brand, Domino’s Pizza, which has a strong market presence.
Company Performance and Success Factors
Jubilant FoodWorks’ success is largely attributed to its successful brand and market share in the QSR Quick Service Restaurant segment. The statistics and investor presentation for Q3 Fiscal Year 2021 highlight the company's growth trajectory, which is driven by customer loyalty and market penetration.
Current Market Scenario
Currently, the share price of Jubilant FoodWorks has fallen from a high of 1350 and is hovering around 1200 levels. As a consumer-facing business, the performance is heavily influenced by current and future trends within the market. Therefore, any quarterly results can significantly impact the stock price in the short term.
Investment Decision: Hold or Sell?
Considering the factors discussed, it seems prudent to continue holding Jubilant FoodShares, given the long-term potential and the enduring strength of the brand. However, short-term volatility could affect the price. For long-term investors, the current levels provide a buying opportunity.
Conclusion and Final Thoughts
While Jubilant FoodWorks has some risks, including an overvalued P/E ratio, the company's consistent growth in sales, net profits, and ROCE, combined with its strong brand, suggest that it is a solid investment for the long run. The support at 1200 levels and the positive market sentiment towards Domino’s continue to underpin the company’s value.
Do share your thoughts or analysis about the company in the comments below, to contribute to the broader discussion and get diverse perspectives.