This Restaurant Chain Could Be a Solid Deal in 2022

JACK has decent potential for growth going forward

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Jack in the Box Inc. (NASDAQ:JACK) is up 2.6% to trade at $82.46 this afternoon. Though a reason for today's pop was not immediately clear, the company announced a couple of weeks ago that it will acquire Del Taco Restaurants (TACO) for approximately $455.3 million. After the acquisition is completed, Jack in the Box will have nearly 3,000 restaurants in 25 states.

The security has pulled back dramatically on the charts since its May 10, all-time high of $124.53, guided lower by the descending 20-day moving average. And though the $77 region seems to have emerged as a floor for the shares, year-to-date JACK is down roughly 11%.

JACK 20 Day

Shorts have been hitting the exits lately, with shot interest down 19% over the most recent reporting period. The 3.16 million shares sold short still account for 5.5% of the stock's available float, though, or more than three days' worth of pent-up buying power.

The options pits lean firmly in the bearish camp. This is per JACK's Schaeffer's put/call open interest ratio (SOIR) of 10.24, which sits higher than all other readings in its annual range. This means near-term put open interest outweighs call open interest by a wider-than-usual margin. 

From a fundamental point of view, Jack in the Box stock currently trades at an attractive price-earnings ratio of 11.21, and a decent price-sales ratio of 1.64. However, JACK also has a forward price-earnings ratio of 12.45, signaling an anticipated decrease in future earnings.

In addition, the fast-food company experienced back-to-back years of net income declines in 2019 and 2020. Nonetheless, Jack in the Box's net income is still up 37% since 2018, while revenues have grown 31.5% overall since 2018. In summary, Jack in the Box stock certainly offers an intriguing valuation, and has decent potential for growth as we head into 2022.


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