The 52-week low list can be a great place to look if you want a swollen dividend (or distribution) yield alongside a valuation that’s on the lower end of the historical range. Of course, many of the fallen names at or around 52-week lows have considerable pressures facing them.
Whether that’s an erosion of the fundamentals, structural headwinds, a fading of tailwinds, or something more transitory, value investors had better put in their fair share of due diligence before even thinking about hitting the buy button. Indeed, the 52-week low list can be home to potential comeback plays priced with deep value in mind.
But, at the same time, a lot of value traps do exist, and, with that, it’s important to know what one’s getting into before backing up the truck solely because of a low price-to-earnings (P/E) multiple (or some other traditional valuation metric) or a heightened dividend yield. In this piece, we’ll check in on a name that’s within a few percentage points of its 52-week low.
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Pizza Pizza Royalty
Enter shares of Pizza Pizza Royalty (TSX: PZA), a terrific pizza chain that’s fresh off a bear market dip. With shares going for just shy of $13 per share, the iconic Canadian pizza play stands out as a compelling candidate for income investors who want value and appreciation potential. Of course, it also helps if you’re a fan of the brand behind the Pizza Pizza locations or Pizza 73, as it’s known out in Alberta.
Of course, it’s not just Pizza Pizza that’s flying through turbulent times, but the broader takeout and delivery pizza industry. The fast-food and quick-serve restaurant (QSR) scene, as a whole, isn’t in the best spot in the world, thanks to the questionable state of the consumer, especially here in Canada. So, is Pizza Pizza Royalty worth a closer look now that its technicals are starting to look a bit more hopeful, with a potential double-bottom pattern that may very well be in the works?
In my view, the technical picture looks quite promising. The name looks quite timely after a slight ricochet off the $1 12.50-per-share floor. That said, the name isn’t quite out of the woods yet, especially as same-store sales growth numbers look to drag further as Canadian consumers look elsewhere for value.
In my humble opinion, Pizza Pizza Royalty stands out as one of the most defensive pizza chains out there for the value it provides. Of course, some of the U.S. chains have been quite aggressive on the value front in recent quarters. And that could make Pizza Pizza’s value proposition look somewhat less appealing on a relative basis, especially as other, bigger chains look to make aggressive moves for that budget-conscious consumer.
For now, the dividend looks more than safe, even though the quick-serve scene isn’t the best place to be these days amid hotter inflation and the increasing appetite for a good deal. While I wouldn’t go as far as to say that Pizza Pizza is losing ground in the so-called “value wars,” I do think that its pocketbook isn’t hefty enough to go all out on the marketing campaigns, especially relative to the big players in the space. Indeed, more marketing means less value passed onto the consumer, but, then again, communicating that value is also key to powering sales higher again.
