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Buzzing Stock - Jubilant Foodworks

dominospizza-masterandstudent
Jubilant Foodworks is flying all around the place and hit an all-time-high of Rs.807, recently. The company came out with an IPO at Rs.145 in 2010, later listed around Rs.200 and it is currently trading at Rs.800. What's buzzing around ? Is it just the momentum or is there any extra flavor to this stock?

The company, known for its popular brand Dominos Pizza, has more than 50% single store cities. In 4QFY11 it entered new cities such as Patna, Bhubaneswar etc. These regions present huge opportunity for penetration-led growth, success of the product in these cities would be a key factor to watch out for in FY2012E. Currently 65% of sales are contributed by top seven cities and 50% of stores are located in Maharashtra, New Delhi and Karnataka.

The company currently trades at more than 50 x 2012E Eps of Rs.15 , which is on the higher side.The company's business model is good and there is huge growth opportunities for the company driven by changing demographic and socio-economic factors. Despite the strong near-term earnings forecast and favorable view, the current valuation of the company (PE of 50X FY2012E), the stock is expensive and one could book profits at current levels. Though, the momentum could take it higher, it would not be in the taste of retail investors to buy at these prices.

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