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Pizza Pizza Royalty Corp. (TSE:PZA)
TSX:PZA

Pizza Pizza Royalty (PZA) AI Stock Analysis

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Pizza Pizza Royalty

(TSX:PZA)

Rating:77Outperform
Price Target:
Pizza Pizza Royalty exhibits overall strong financial health and stability, supported by effective cost management and a robust equity position. The stock's moderate valuation with a high dividend yield is appealing, yet caution is advised due to the high payout ratio and recent sales challenges. Expansion efforts and marketing innovations provide long-term growth potential, but short-term outlook is affected by external economic pressures and declining sales.

Pizza Pizza Royalty (PZA) vs. iShares MSCI Canada ETF (EWC)

Pizza Pizza Royalty Business Overview & Revenue Model

Company DescriptionPizza Pizza Royalty Corp., through its subsidiary, Pizza Pizza Royalty Limited Partnership, owns and franchises quick service restaurants under the Pizza Pizza and Pizza 73 brands in Canada. It also distributes food. As of December 31, 2021, the company had 727 restaurants in the royalty pool. Pizza Pizza Royalty Corp. was founded in 1967 and is headquartered in Toronto, Canada.
How the Company Makes MoneyPizza Pizza Royalty Corp makes money primarily through the collection of royalty fees from its franchisees. The company has established a structure where franchisees pay a percentage of their sales to PZA in exchange for the use of the Pizza Pizza and Pizza 73 brand names, trademarks, and operational systems. This model ensures a steady income stream that is tied to the overall performance of the franchised locations. The company’s revenue is thus directly linked to the sales generated by the restaurants under its brands. Key factors contributing to its earnings include the growth and success of its franchise network, effective brand management, and the continued popularity of its food offerings among consumers.

Pizza Pizza Royalty Earnings Call Summary

Earnings Call Date:May 07, 2025
(Q1-2025)
|
% Change Since: 1.14%|
Next Earnings Date:Aug 06, 2025
Earnings Call Sentiment Positive
The earnings call reflects a positive start to 2025 with solid sales growth, successful product innovations, and effective marketing strategies. Despite economic challenges and a high payout ratio, the company is maintaining a strong franchise network and is optimistic about future growth and expansion.
Q1-2025 Updates
Positive Updates
Positive Same-Store Sales Growth
Pizza Pizza and Pizza 73 reported a combined same-store sales growth of 1.2% in Q1 2025, with Pizza Pizza at 0.6% and Pizza 73 at 4.3%.
Innovation and New Product Success
Introduction of the massive 18-inch pizza and Loaded Tater Tots led to increased sales. The new stuffed crust option at Pizza 73 doubled sales expectations.
Effective Marketing Strategies
The reverse tariff promotion with a 25% discount was successful, particularly around the Four Nations Hockey final, driving visibility and incremental sales.
Expansion and Franchise Growth
Opened two traditional and two nontraditional Pizza Pizza locations, and one traditional Pizza 73 location, with a planned 2% to 3% network expansion in 2025.
Increased Royalty Income
Royalty income increased 1.9% to $9.7 million in the quarter due to same-store sales growth and additional restaurants in the Royalty Pool.
Strong Franchisee Network
Positive franchisee sentiment and recognition as the number one franchise from the Elite franchise award.
Negative Updates
Economic Challenges and Competitive Environment
The economic landscape is challenging with heightened competition and customers being more deliberate in managing their spend.
High Payout Ratio
The payout ratio for Q1 2025 was 117%, resulting in a decrease in the company's working capital reserve by $900,000.
Delayed Expansion in Mexico
Expansion efforts in Mexico have been slower than expected, with difficulties in lease agreements and construction timelines.
Company Guidance
In the Pizza Pizza Royalty Corp.'s earnings call for the first quarter of 2025, the company reported a positive start to the year with a combined same-store sales growth of 1.2%. Pizza Pizza restaurants experienced a 0.6% growth, while Pizza 73 saw a 4.3% increase, despite lapping a positive Q1 growth of 1.7% in 2024. The quarter's success was attributed to increased guest traffic and average customer checks, driven by new product launches and marketing initiatives like the XXL pizza at $20 and the 25% reverse tariff promotion. Additionally, Pizza 73 introduced the Skinner Dinner and signature wraps, contributing to its performance. The company also expanded its restaurant network, adding four new Pizza Pizza and one Pizza 73 locations, while closing five others. Looking ahead, the company expects a 2% to 3% growth in traditional restaurant expansion and continues to invest in technology to enhance customer engagement. Financially, Royalty Pool System Sales increased by 1.6% to $151.3 million, with royalty income rising by 1.9% to $9.7 million. The quarter's payout ratio was 117%, leading to a decrease in the working capital reserve to $5.2 million.

Pizza Pizza Royalty Financial Statement Overview

Summary
Pizza Pizza Royalty showcases strong financial health with robust profitability and efficient cash flow management. Despite minor revenue fluctuations, the company maintains low leverage and a high equity position, reflecting financial stability and operational efficiency.
Income Statement
85
Very Positive
Pizza Pizza Royalty demonstrates strong profitability with consistent gross profit margins at 100% due to its royalty business model. The net profit margin has remained robust at approximately 78% in 2024. Revenue has shown resilience with a slight decrease of 1.02% in 2024 compared to 2023, following a notable growth from 2021 to 2023. EBIT and EBITDA margins are exceptionally high, indicating effective cost management. Overall, the company showcases stable profitability despite minor revenue fluctuations.
Balance Sheet
80
Positive
The company exhibits a strong equity position with an equity ratio of 79.8% in 2024, reflecting financial stability. The debt-to-equity ratio remains low at 0.16, indicating a conservative approach to leverage. Return on equity is impressive at 10.38%, showcasing efficient use of shareholder capital. Overall, Pizza Pizza Royalty maintains a healthy balance sheet with low leverage risk and strong equity support.
Cash Flow
78
Positive
Cash flow from operations remains healthy, closely matching net income, which reflects strong cash generation capability. Free cash flow remains stable, with a slight decline in growth due to reduced revenue. The operating cash flow to net income ratio is above 1, indicating efficient cash conversion. While free cash flow aligns well with net income, the absence of capex suggests a focus on maintaining existing operations. Overall, cash flow stability supports operational needs and shareholder returns.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
39.98M39.81M40.22M36.43M31.92M31.79M
Gross Profit
39.98M39.81M40.22M36.43M31.92M31.79M
EBIT
39.24M39.09M39.58M35.80M31.36M31.15M
EBITDA
29.80M39.48M36.23M35.88M31.36M31.66M
Net Income Common Stockholders
31.00M30.97M30.98M27.55M23.92M24.47M
Balance SheetCash, Cash Equivalents and Short-Term Investments
4.89M5.78M8.51M7.94M6.16M5.00M
Total Assets
361.25M373.75M370.09M367.83M363.06M361.55M
Total Debt
46.93M46.99M46.98M46.96M46.94M46.92M
Net Debt
45.54M46.21M44.47M45.02M44.28M44.67M
Total Liabilities
72.47M75.53M76.18M75.41M72.83M73.14M
Stockholders Equity
288.79M298.22M293.91M292.42M290.23M288.40M
Cash FlowFree Cash Flow
31.75M30.80M31.35M28.99M24.75M25.19M
Operating Cash Flow
31.75M30.80M31.35M28.99M24.75M25.19M
Investing Cash Flow
1.00M1.00M0.00-2.50M-750.00K0.00
Financing Cash Flow
-33.49M-33.52M-30.78M-27.21M-23.60M-23.47M

Pizza Pizza Royalty Technical Analysis

Technical Analysis Sentiment
Positive
Last Price14.81
Price Trends
50DMA
14.06
Positive
100DMA
13.51
Positive
200DMA
13.04
Positive
Market Momentum
MACD
0.18
Positive
RSI
62.26
Neutral
STOCH
67.46
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:PZA, the sentiment is Positive. The current price of 14.81 is above the 20-day moving average (MA) of 14.64, above the 50-day MA of 14.06, and above the 200-day MA of 13.04, indicating a bullish trend. The MACD of 0.18 indicates Positive momentum. The RSI at 62.26 is Neutral, neither overbought nor oversold. The STOCH value of 67.46 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:PZA.

Pizza Pizza Royalty Peers Comparison

Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSPZA
77
Outperform
$493.97M15.7810.29%6.16%-1.02%-1.76%
62
Neutral
$6.88B11.322.90%3.87%2.70%-24.57%
QSQSR
$32.45B24.2531.29%3.33%
73
Outperform
C$44.92B24.1227.52%3.34%21.63%-9.39%
TSODD
49
Neutral
C$23.62M
-6.91%31.42%
TSAEG
C$31.13M6.54%
$691.72M130.101.11%2.89%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:PZA
Pizza Pizza Royalty
14.81
2.42
19.51%
QSR
Restaurant Brands International
71.30
5.98
9.15%
TSE:ODD
Odd Burger Corporation
0.24
0.07
41.18%
TSE:QSP.UN
Restaurant BrndLP
99.08
8.95
9.93%
TSE:AEG
Aegis Brands
0.36
0.00
0.00%
MTYFF
MTY Food Group
30.24
-2.57
-7.83%

Pizza Pizza Royalty Corporate Events

DividendsBusiness Operations and StrategyFinancial Disclosures
Pizza Pizza Royalty Corp. Reports 2024 Financial Results Amid Expansion
Neutral
Mar 31, 2025

Pizza Pizza Royalty Corp. reported a decrease in same-store sales and royalty pool sales for both the fourth quarter and the full year of 2024, attributed to challenging economic conditions and increased competition. Despite these declines, the company expanded its restaurant network by 23 net locations in 2024, with 48 new restaurants opened, and continued to leverage its value-oriented offerings to attract customers. The company declared increased dividends for the year, reflecting its commitment to maximizing shareholder returns, despite a higher payout ratio compared to the previous year.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.