This is a short story about pizza.
RAVE Restaurant Group (RAVE, NASDAQ)
$1.32 per share | $22 million market cap | Trading at 52 week high
Before serving RAVE up as a new micro cap investment idea why don’t we consider a few of their largest competitors — Domino’s Pizza (DPZ, NYSE) and Papa John’s (PZZA, NASDAQ). Unless you’re partial to Pizza Hut, which is owned by YUM Brands (YUM, NYSE), those are the world’s preeminent pizza providers. Anywhere near and down the road from them you’ve got your local mom and pop pizza shop(s) or a small chain store like Pizza Inn and Pie Five(RAVE‘s brands).
Pizza is a competitive industry. There’s a lot of choices! Sometimes I wonder why someone would start a new pizza place in an area that’s already got 3, 5, or 1o of em’. It’s like, did this area really need another?
People love pizza though, especially kids. Going out for pizza can be a fun family event. Even better if it’s a pizza buffet! Delivery can be fun too, and easy! And relatively inexpensive. Mom, dad, or whomever does most of the cooking gets a night off. For some households it’s part of a weekly or monthly schedule. Pizza is a comfort food we reach for during happy and sad times. Pizza (and wings) are a staple at many parties and sporting events.
Who doesn’t like pizza?!
Well, according to some statistics about 48% of the population doesn’t eat pizza as much as they’d like because of health reasons (they’re dieting). In general though about 98% of us eat pizza.
Fine, but can you make money with a pizza related investment?
Yes.
In fact, looking at 2 of the titans, Domino’s and Papa John’s have generated fortunes for long-term shareholders. It’s actually incredible how great these 2 pizza chains have done.
- From a low of $6 in 2008, before some major changes were made to Domino’s recipe/ingredients, DPZ made an all-time high of $564 last year (now it’s trading $341, market cap $12 billion).
- Papa John’s, who’s touted “better ingredients better pizza” from their beginnings, has risen from $3 in 1994 to as much as $133 (now it’s trading $74, market cap $2.6 billion).
RAVE is trading $1.32 per share, market cap $22 million. The stock isn’t at an all-time high, that was about $15 per share in 2015, but it has been rising since mid-2020, as COVID-19 really started kicking off. Comparable store retail sales, at both of their brands, rose a remarkable 23% and 24% year over year.
With 159 locations Pizza Inn is the largest of RAVE‘s 2 brands.
Going out for pizza can be a fun outing or family event but does anything match the buffet experience, especially when everyone is hungry! There’s something old school and special about a buffet that’s got even just average tasting pizza plus a salad bar.
This is what families find at most Pizza Inn’s, pizza plus a salad bar. If Pizza Inn doesn’t have exactly what you want sitting on the buffet they’ll make it on request. They’ve also got pastas and deserts.
With 31 locations Pie Five Pizza is the smaller and newer of RAVE‘s 2 brands.
Pie crusts are made from scratch at all locations. And as you see advertised, Pie Five is looking to sell personalized pizzas. There’s more flavorings and recipes when it comes to crust, sauce, cheeses and toppings.
It’s called Pie Five because people get their customized pizza made in 5 minutes.
Bottom Line: Pizza is a competitive but simple industry. Practically 98% of the population eats pizza occasionally or regularly. Popular (major) chains like Domino’s and Papa John’s made major money for patient shareholders who got in early (and afterward). RAVE recently revamped its Pizza Inn chain of buffet’s by hiring Boone Oakley, an award-winning retail design firm. Pie Five comes off as more of a hip “in-and-out” Chipotle-style pizza place. RAVE has been performing well since mid-2020 as both brands post regular sales growth (basically 23.5% last year).
RAVE has had a big move this year, from a low of 90 cents up to a 52-week high of $2.28. It’s since pulled back sharply following a “disappointing” or sell the news quarterly update.