Day Trading Pro

I’ve developed a real appetite for shares of Jack in the Box fast
food restaurants (NYSE: JBX). It’s not that they have the best
burgers in the business, but I think the stock is a great buy
right now.

For those of you in the eastern half of the country, you may not
be as familiar with the Jack. The chain was founded in 1951 in
San Diego, and now has about 2,100 locations, mostly along the
west coast. This year they are expanding, with new restaurants
popping up in Colorado and Texas.

It took a while, but the chain fought its way back from a huge
health crisis 15 years ago. In 1993 an E. coli bacteria outbreak
sickened many customers, and even killed some people.

The Price-to-Earnings (P/E) ratio is a good indicator of which
way a company’s share price is headed, and it’s easy to
calculate. The P/E takes the share price and divides it by the
earnings per share (which is the company’s entire net profit
divided by the number of shares in issue). So the P/E ratio
relates the market’s valuation of a company to the company’s
actual profits.

A lower P/E ratio is a good indication of a bargain. And at 12,
Jack in the Box looks great. Compare this to competitors
McDonalds and YUM Brands (Burger King, Taco Bell, KFC). Mickey
D’s P/E is at 28 and The King is at 23.

The company recently reported second quarter earnings of $26.4
million, or 44 cents per diluted share. Second quarter profit
was hurt by higher costs for cheese, dairy, and eggs, and the
company has lowered sales expectations for the third quarter.
Over the past year, JBX shares have slipped from a high of $39
last June down to the current $23 price.

At these bargain prices, I had no choice but adding JBX to my
long-term portfolio. I bought at $23.40. My target for the share
price is a +100% gain within a year. And a Coke.

All the best,

Manny Backus
First Hour Trader

P.S. Find out the difference between the 3% of traders who make
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