Is Jack in the Box’s Share Buyback Program a Good Deal for Shareholders? презентация

for Shareholders?

By Sean O’Reilly

it advisable for a company to repurchase its shares: First, the company has available funds -- cash plus sensible borrowing capacity -- beyond the near-term needs of the business and, second, finds its stock selling in the market below its intrinsic value, conservatively calculated.”
-- Warren Buffett, 1999 Berkshire Hathaway Chairman’s Letter to Shareholders

Box announced a new $200 million share repurchase program
This was part of JACKs’ recent efforts in recent years to “return capital to shareholders”
Follows $317 million worth of share repurchases so far in FY 2015
Company initiated a dividend in 2014

Is this the best use of shareholder’s capital?

5, 2015:
Earnings per share grew 16.9% year over year to $0.76
Revenue growth was lackluster, rising just 3.1%
Same store sales growth compared to the same period last year was within expectations:
Jack in the Box Restaurants: 7.3% increase
Qdoba- 7.7%
GAAP operating earnings per share guidance for the full year was raised slightly

to slide from $97 to a recent $75
Forward guidance was the culprit:
Previously guided for 50 to 60 new Qdoba restaurants this year, this was lowered to 40 to 45
Full year Same-store sales at company-owned Jack in the Box locations projected to grow 5.0 to 5.5%

example of intelligent capital allocation, or a waste of shareholders’ money ?

investments
Dividends
Share repurchases
Acquisitions

in light of current share price
Company has spent even more on buybacks as share price has tripled
Suggests the recent $200 million buyback is being made out of habit

earnings estimates and 20 times trailing free cash flow
Analysts estimate earnings per share growth of 12% per annum through fiscal year 2019
JACKs’ return on equity has averaged 18.7% over the last five years
Share repurchases and dividends are greater than free cash flow

at 18.96
Modestly lower than JACK
JACK earnings growth is good but not astronomically higher than corporate America

Would you want to own LMT at current valuation or the S&P 500?

shares
Shareholders better served by investing free cash flow in further store expansion
Fast-growing Qdoba chain a strong candidate
Latest buyback program being made for the sake of appearances, not after careful analysis