7 Reasons to sell PZZA

I have looked into the financials of several pizza franchises recently (see DPZ vs YUM). It seems to me PZZA was the worst of them, and at the moment (May 21st, 2020, price $78) I would recommend sell or short if you are into that. My target price is $40 a share, if not lower.

Here is a summary, with 7 reasons to sell PZZA:

• The operating income in 2018 and 2019 are down 80% from 2017, due to less revenue and some “Special charges” to help franchisees with declining revenues
• After paying dividends, the company looses money
• Total revenues have been declining since 2017
• There are now a lot of preferred shares, that could force the company to cut dividends for common shares. The company doesn’t really have the means to pay dividends anyways
• Despite the above issues, PZZA is up 63% year over year, and up 18% in the last 5 years
• The shares are trading at PE ratio of 2400, and price/sales is 1.5 (higher than average)
• Operating income is only 1.5% of revenues, of which almost all goes to pay interest on debt and preferred shares dividends

Seems like a trap to me.