Casey's General Stores: Top 10 Pizza Chain No One's Appreciating?

When it comes to pizza, Deutsche Bank analyst Karen Short thinks Wall Street is mostly overlooking one top stock with a compelling risk/reward balance. While names like Domino’s Pizza, Inc. DPZ and Papa John’s Int’l, Inc. PZZA get much more coverage, Short argues that Casey’s General Stores Inc CASY is flying under the radar.
 

“They are a top #10 pizza chain in the US, and they have consistently generated 2-yr stacked comps above PZZA, and at least in-line with DPZ,” Short says of Casey’s. In her latest note, she has raised Deutsche Bank’s fiscal 2017 EPS estimate for the stock from $5.53 to $5.70, upped the firms price target from $120 to $130, and upgraded the stock from Hold to Buy.

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Short says that the primary risk to her bullish thesis is lower fuel margins. The firm estimates fiscal 2017 fuel margins of $0.158, but Short clarifies that fuel margins as low as $0.10 would still only reduce Deutsche Bank’s valuation to $110. Clearly, the firm sees very little potential downside to the stock at current levels.

So far in 2016 Casey’s stock has lagged both Domino’s and Papa Johns, falling 6.7 percent year-to-date. The $130 price target represents about 18 percent upside.

Disclosure: the author holds no position in the stocks mentioned.