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)

Market Cap

$493.97M

Dividend Yield6.16%

Average Volume (3M)41.80K

Price to Earnings (P/E)15.8

Beta (1Y)0.52

Revenue Growth-1.02%

EPS Growth-1.76%

CountryCA

Employees1,325

SectorConsumer Cyclical

Sector Strength62

IndustryRestaurants

Share Statistics

EPS (TTM)0.23

Shares Outstanding24,618,393

10 Day Avg. Volume20,356

30 Day Avg. Volume41,801

Financial Highlights & Ratios

PEG Ratio-14.98

Price to Book (P/B)1.63

Price to Sales (P/S)0.00

P/FCF Ratio11.48

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$14.00

Price Target Upside-5.50% Downside

Rating ConsensusHold

Number of Analyst Covering1

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

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

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

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.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
39.98M	39.81M	40.22M	36.43M	31.92M	31.79M
	Gross Profit
39.98M	39.81M	40.22M	36.43M	31.92M	31.79M
	EBIT
39.24M	39.09M	39.58M	35.80M	31.36M	31.15M
	EBITDA
29.80M	39.48M	36.23M	35.88M	31.36M	31.66M
	Net Income Common Stockholders
31.00M	30.97M	30.98M	27.55M	23.92M	24.47M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
4.89M	5.78M	8.51M	7.94M	6.16M	5.00M
	Total Assets
361.25M	373.75M	370.09M	367.83M	363.06M	361.55M
	Total Debt
46.93M	46.99M	46.98M	46.96M	46.94M	46.92M
	Net Debt
45.54M	46.21M	44.47M	45.02M	44.28M	44.67M
	Total Liabilities
72.47M	75.53M	76.18M	75.41M	72.83M	73.14M
	Stockholders Equity
288.79M	298.22M	293.91M	292.42M	290.23M	288.40M
Cash Flow		Free Cash Flow
31.75M	30.80M	31.35M	28.99M	24.75M	25.19M
	Operating Cash Flow
31.75M	30.80M	31.35M	28.99M	24.75M	25.19M
	Investing Cash Flow
1.00M	1.00M	0.00	-2.50M	-750.00K	0.00
	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
PZA	77 Outperform	$493.97M	15.78	10.29%	6.16%	-1.02%	-1.76%
Sector *	62 Neutral	$6.88B	11.32	2.90%	3.87%	2.70%	-24.57%
QSR		$32.45B	24.25	31.29%	3.33%	―	―
QSP.UN	73 Outperform	C$44.92B	24.12	27.52%	3.34%	21.63%	-9.39%
ODD	49 Neutral	C$23.62M	―		―	-6.91%	31.42%
AEG		C$31.13M	―	6.54%	―	―	―
MTYFF		$691.72M	130.10	1.11%	2.89%	―	―

* Consumer Cyclical Sector Average

Performance Comparison

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.