Fast Casual Pizza? Introducing Rave Restaurant Group

In a report published Thursday, Wunderlich analyst Robert M. Derrington initiated coverage of

with a Buy rating and price target of $18. The company was renamed from Pizza Inn Holdings to RAVE Restaurant Group in January 2015 "to reflect its expanding prospects." The company is one of the fastest growing in the Fast Casual Pizza space. "Management intends to capitalize on its growth through its Pie Five (PF) concept, projected to remain one of the leaders in FC Pizza and one of its fastest growing brands. We project its rapid growth to push PF system sales up 122 percent in FY15, 136 percent in FY16, and 78 percent in FY17; pushing RAVE revs up," Derrington said. The analyst believes that this growth has been driven not only the consumers' love to pizza but also the company's updated and more consumer-friendly format. Also, Pie Five stands out from the competition due to the faster cook time, as compared to most of its peers, the lower than five minutes service time and pricing. The analyst expects Pie Five to see the fastest sales and units growth in the industry through 2019. "As RAVE's higher-margin company sales and franchise revs accelerate vs. its lower-margin distribution revs, we project margins to continue to expand, fueling growth in adjusted EBITDA," the Wunderlich report said. With continuing expansion and increasing economies of scale and operations, the analyst expects Rave Restaurants to move from the operating loss of $1.6 million in FY15 to modest levels of profit by end-2017.