Long

JACK versus CMG - Valuation Measures

With JACK, you get a valuation less than 2 times sales compared to over 5 times sales for CMG. CMG is 250% more expensive than JACK, or JACK is 60% cheaper than CMG on this basis.

With JACK, you get 30% returns on equity, which compares very favorably with 20% for CMG. JACK is 50% better in this category.

A major issue, and why JACK is cheaper, is that sales growth has been lagging at JACK but from what we can see on the horizon, the store openings will lead to more sales and more sales growth. CMG had 20% sales growth in the last 12 months, which compares very favorably to JACK.

Putting the whole story together: If sales can begin to grow meaningfully, then JACK will get a huge bump in valuation as investors most likely will lighten up on CMG and move funds into JACK.

JACK would be more than quadruple its current price if it had sales growth close to CMG. QUADRUPLE. More likely, CMG will fall and JACK will rise, relatively, over the coming quarters and years.

Tim
Friday, September 26, 2014 4:54PM EST