Why Jefferies Thinks Bojangles Is A Buy

In a report published Tuesday, Jefferies analyst Andy Barish initiated coverage of Bojangles Inc (NASDAQ: BOJA) with a Buy rating and $32 price target.

The analyst believes that consistent unit and same-store sales growth would drive acceleration in EBITDA and EPS for the company in the double digits, going forward. "Its strong breakfast daypart and regional growth throughout the SE are key attributes," Barish said.

The company has been able to create a strong regional brand in the Southeast through the last 38 years, with its fresh fried chicken and biscuits. Today, the brand stands at No. 5 in the $21 billion QSR chicken category. The company also offers a robust breakfast daypart, which contributes almost 40 percent of the sales and has developed a loyal customer base.

According to the Jefferies report, "Bojangles' has a strong people and service culture that should help the brand perform going forward." The company operates across more than 625 locations and has seen average unit growth of $1.8 million with more than 20 percent restaurant level margins. In recent years, Bojangles has witnessed unit growth of 7-8 percent, and the analyst expects this growth to continue, going forward.

"All of this growth will be concentrated in the 10 state Southeast region, where Bo's can double its footprint," Barish stated, while adding that there could be upside to the 2016 estimates.