The next company on my list of the top 25 stocks for the NEXT 25 years is California Pizza Kitchen (NASDAQ: CPKI). This Los Angeles-based company currently has 210 units open, with the company operating 180 of them -- the remaining 30 are franchised. The concept was founded in 1985, but serious growth began about five years ago.
CPKI has the room to expand the concept by a factor of 15. The United States alone can support upwards of 3,000 stand-alone units. Pizza is one of America's favorite food choices and pizza transcends all demographics and appeals to virtually all ethnic tastes. The hallmark of California Pizza Kitchen is the freshness and the high quality of its pizza products. The company also offers a variety of entree-size salads, pastas and freshly made soups to satisfy almost any taste.
CPKI has initiated a loyalty card for its customer base to accommodate both convenience and repeat business. The company has also published its own cookbook filled with its signature pizza recipes. The average unit volume for CPKI is upwards of $3 million annually and growing. California Pizza Kitchen recently signed a deal with Kraft Foods Inc. (NYSE: KFT) to manufacture and distribute its frozen pizzas to the grocery store sales channel. Not only does this deal help CPKI build its revenue base, but it also helps spread the word about its dedication to a quality product. The Kraft opportunity allows for distribution to all 50 states.
The co-founders of CPKI are Rick Rosenfield and Larry Flax. Both serve as co-chairmen and co-presidents of the company. As both gentlemen are in their early 60's, the question remains about management succession. Or does the company sell out to a larger operator? If management succession can be put in place over the next few years, CPKI has the opportunity to become a very large and very profitable company. With a potential growth factor in units at 15 times plus other possible distribution arrangements, CPKI could become a multi-billion dollar company with a mega-billion market capitalization.
I estimate revenues for 2007/2008 at $650 million and $755-760 million respectively, with correspondent earnings per share at $1.30 and $1.60-1.65. The current market capitalization is $680 million, or about one-times sales.
California Pizza Kitchen is an excellent concept with room for mega growth, and could be a top 25 stock for the NEXT 25 years.
Georges Yared is the CIO of Yared Investment Research where he explores more growth stock ideas.
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