Stock analysts disagree on California Pizza Kitchen performance

June 30, 2003

NEW YORK -- Stock market analysts are at odds over whether California Pizza Kitchen represents a good near-term buy.

According to, RBC Capital Markets issued a "sector perform" rating for CPK and dropped its target price from $28 to $26 in expectation of earnings declines. RBC is forecasting CPK's sales will remain flat and that it will struggle with unit-level efficiencies. Gross margins, the report said, "are expected to deteriorate" despite increased revenues from new store openings.

Standard & Poor analysts, however, view the mid-scale chain's potential far differently. According to a BusinessWeek report, the firm believes CPK's current valuation doesn't reflect its growth potential.

"S&P's discounted cash-flow model, which assumes annual earnings-per-share growth of 15 percent to 20 percent over the next several years, intrinsically values (CPK) shares at $35," the BusinessWeek report said. S&P believes CPK could grow from its current 150-store total to 350 within the same timeframe.

Topics: Operations Management , Public Companies

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