Can You Make Some Dough With This Pizza Penny Stock?

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Key Takeaways:

• An executive who helped turnaround Domino’s is attempting to do likewise at Rave Restaurant Group. 
• The company appears to have left its bad days behind. 
• While Rave is hardly a core holding, this penny stock could find a place in the speculative section of your portfolio. 

Rave Restaurant Group has been on a tear. Up more than 31% YTD. 

However, that’s not the whole story. Expand out to a year and you’ll see Rave’s ride has been wild. 

The stock retraced its steps from high to low to high again. 

Who Is Rave?

Rave owns two pizza brands: Pie Five Pizza and Pizza Inn. 

Pie Five is the smaller of the two with locations in California, Oregon, Texas, Oklahoma, Kansas, Alabama, Arkansas, Missouri, Iowa, Illinois, Kentucky, and Virginia. 

Outside of Texas, where it has 14 stores, Pie Five Pizza’s footprint is relatively small. For example, it only has two west coast locations, at San Francisco airport and in Corvallis, Oregon. 

Pizza Inn is much larger. More than 200 locations concentrated in the southern and southern-leaning midwestern United States. Pizza Inn also has operations internationally with about three dozen locations, primarily in the Middle East and New Zealand. 

Why Did The Stock Drop? 

Pretty simple actually.

Nasdaq threatened delisting RAVE twice in the last few years. Once in mid-2020 and another time in early 2021. The company had to issue more than 3,000,000 additional shares to raise cash, increase shareholder equity, and stay on the exchange. 

It was successful. 

And, of course, it also had to deal with the pandemic. 

Will Rave Continue To Pop?

In 2020, Rave also made some management changes, bringing on a former Domino’s Pizza (DPZ) VP – Brandon Solano – as its CEO. Solano also spent 10 years as CMO at Wendy’s (WEN).

This is where it gets interesting. 

Earlier this month, while discussing another penny stock and a potential turnaround at Bed Bath & Beyond (BBBY), The Juice brought up the incredible turnaround Domino’s executed in 2009-2010:

For example, through the early 2000s, Domino’s Pizza… traded in the single digits and teens…

Domino’s was left for dead. Then, it made fun of itself for its cardboard-like pizza in a series of ads where it promised to do better. Domino’s did better and created a solid digital and mobile strategy in the process. Before you knew it, DPZ was off to the races.

Solano helped lead the charge on that successful and now industry-renowned marketing campaign. 

With Solano leading Rave, here’s what has helped drive the stock in 2022:

• For its fiscal Q3, ending in March, Pizza Inn and Pie Five reported respective 27% and 19.5% domestic, year-over-year sales increases. 
• In its most recent quarter, announced earlier this month, Rave now boasts nine consecutive quarters of profitability with fiscal 2022 net income of $0.45 per share, up from $0.09 a year prior. 
• Pizza Inn domestic sales increased 24.7% annually. 
• Pie Five sales popped 17.1%. 
• The company has spent more than $1.5 million to buy back shares in 2022, the first time it has done so in about a decade.

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The Bottom Line: So Rave’s most recent quarter accounts for the stock’s 18% five-day return, as of Tuesday’s close. 

Does this mean you should load up the truck on this penny stock? 

Not necessarily. 

As with any speculative investment, proceed with caution. However, this isn’t a shot-in-the-dark penny stock. Rave’s numbers appear headed in the right direction, led by an industry veteran who was at the helm of Domino’s impressive turnaround. 

So there’s a solid narrative there. 

You’re not merely wishing and hoping that some random lottery ticket will pay off.

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