Panera just paid $15.2 million for 13 franchised restaurants or $1.16 million per restaurant. The company now has 1,000 (approx--including co owned and franchised)restaurants. If one would take the 1,000 and multiple x $1.16 million you get a value of $1.16 billion vs a market cap of just over $2 billion. Now that being said, PNRA only owns around 350 restaurants and the franchised restaurants are worth significantly less than company owned units, which would imply an even lower (significantly) value than the $1.16 billion. So this would imply a massive overvaluation by the stock market. By the way, if one would have run these same numbers on KKD (anyone remember that one), you would have missed out on the huge over-valuation there as well. All you had to do was take a realistic view. Don't shoot the messenger and yes this is only one man's opinion.
Much of Pnra's value is in future stores, both company and franchised. Your analysis assumes there will be no new stores and is basically a liquidation valuation. Next year, alone, will bring 160 new stores and analysts are generally predicting 3000, 3500 or more stores ultimately, plus international. Another significant portion of Pnra's value is the fresh dough facilities which earn money off the franchisees and have intrinsic asset value in their own right. There are other intangible and tangible assets and no debt. The correct way to compute the value of a franchised store to Panera, is to take the approximately 100k annually in royalties (2 mil x 5%), add the fresh dough profits, allocate appropriate expenses and put a fair multiple on the result. What the store could be sold for is interesting but not the source of its value as a going concern to Panera.
We, of course, don't know the circumstances of the purchase, the reason the sellers wanted to get out (retirement, illness, made enough money, etc.), required renovations, whether the stores on average were underperforming the median, etc. What we do know is that Pnra is expected to earn 2.40 in '07 and continues to grow at about 25%. Extrapolating from a single transaction and ignoring future stores and other assets is not IMHO the way to value the company.
You stated, "What we do know is that Pnra is expected to earn 2.40 in '07 and continues to grow at about 25%"
Know and expected are two entirely different statements. Expected by whom, investment bankers looking for biz, insiders who have sold chunks of stock over the last few years...assume 25%, damn that is a nice round number, they sure seem to be struggling this year. I guess it all boils down to Crispani becoming the homerun product of the century.
I agree my calculations were simplistic and there is an intangible value which should be factored in for the ability to open and franchise new stores. But it is an interesting calculation--and if you came up with a discounted value of the franchise royalties it would be significantly less than the value of a company owned unit. 2007 estimates are just that, they didn't hit 2006 estimates did they? How do you know they will have 3000 stores? What about cannabilzation, etc. All I am saying it is hard to justify the mkt cap. Again one man's opinion.