The Pantry, Inc. (NASDAQ:PTRY)

Cost cutting and upgrades in progress.Profitability on rise. too cheap now.

I LOVE KANGAROOS!

I think ultimately these types of convenience stores will come to symbolize the early 2000's.

I'm also thinking they are the Wawa/Sheetz of the Southeast? Is that accurate?

PRTY is going to PARTY!! (also known as KANGAROO)

Still 2% within a 12 month low, Extreme undervaluationv (p/e ratio 5 ; industry p/e = 135), good cap size for immediate growth (zero div), 8410 employees (for this industry, this company probably isn't going to die alone), Revenue has dropped (red flag) however, net income/EBIT have been on a steady overall rise for the past 3 years! (green flag).

AND!!

The biggest green flag of all: Insider buying. Check the SEC 10-4 forms. Corporate exec. buy ins exploded in December!

Great future earnings.

This stock is undervalued, as the economy comes back the Pantry is set to benefit from increased travel and goods shipment.

low relative PE, good star & 2010 earnings. Bottom fishing week of 11/30

earnings projections are on the way back up, and this stock is far below the P/E of its industry peers. On the next one or two earnings cycles, I think it will bounce quite significantly. I note it's been ahead of earnings projections (way ahead!) for the last two quarters.

Recent Price and earnings momentum.

hit a bottom

Bought Puts.

Numbers are good, Management seems solid. Can't do much about oil and gas prices, but you can make good money from buying oversold stocks. Chalk another one up to panic and mayhem. Personally, when I saw this stock go below $12, even I was panicked... Panicked my buy order for 2000 shares wouldn't go through before the stock price returned to $14 - $15.

Stock collapsed on a bad fuel hedge and slightly lower sales. It should recover nicely as margins improve in the coming quarters. The sell off is overdone, and even looks like it could be a classic no uptick bear raid.

I see a company which has made some aquisitions and is not paying off the debt from these to retool the stores under one brand name. Big future profits is what I belive the result will be.

Great growth and earnings.

Well off its 52 week high, making it a current buy. Under the radar, but a good company.

PTRY EPS suffered this year due to integration costs and a uncharacteristically weak Q1'07. When Q1'07's EPS of $0.01 rolls off and is replaced by a more normal $0.60, the company should be well on its way to achieving its projected $2.80 to $3.10 EPS for fiscal '08. This is not a heroic leap. If margins simply remain at their Q2 levels and gas gallons are flat, this EPS is not going to be a challenge. I believe analysts ($2.83 EPS est.)are overly discounting management's forecast because management was forced to lower it's estimates for F'07 due to the unusually high prices of gas. But as gas prices stabilize (or, better yet, decline some), PTRY will be able to make normal margins (as it did in Q2'07 and Q3'07).

If you believe in the '08 EPS as I do, then the stock appreciation arguement is an easy one. 18x $2.80 is a $50.40 stock price and a 48% increase--much higher than I expect for the S&P. Even at 16x its a $44.80 price and a 31% increase. And if gas prices decline, and/or the Petro acquisition's merchandise margins can be increased to match the rest of PTRY's, there is great upside!

I also believe the leverage ratio of the company is overstated. No doubt, they carry a significant amount of debt, but it is important to include a full year of Petro Express' earnings, which the historical numbers do not. This can be seen in a projection of PTRY's Net Debt/EBITDA levels which fall from about 4.75x as of Q3'07 to about 3.75x as of Q4'08. EBIT/interest is over 2x the whole time. To me, their leverage appears very managable. This is supported by their built-in bank loan increase feature, allowing them to increase their bank facility by $100 million in the next year.

If I had a criticism, it would only be that I'd like to see management more aggressively buying their stock, especially at the current price. However, the recent buyback certainly indicates that the board believes in the attractiveness of the stock price and the future cash flows of the company.

Excellent management and a track record of performance

The price is right: Lower PE accounts for lower growth and margins than its industry peers.

The Pantry, Inc. operates a convenience store chain in the southeastern United States. The company’s stores offer a selection of merchandise, gasoline, and ancillary products and services. As of September 2006, the company operated 1,493 convenience stores in 11 states under select banners, including Kangaroo Express, Handy Way, Quick Stop Depot, Food Chief, Pantry, and Mini Mart. The company’s gasoline operations have the provision of a mix of branded and private brand gasoline at 1470 stores. Approximately 40% of its stores are located in coastal, resort or tourist destinations.

The Pantry operates in a highly competitive industry. The industry’s results are affected by the volatile crude oil and domestic wholesale petroleum markets. The market is shared by a number of convenience stores, supermarkets, gasoline service stations, and other similar retail outlets. The Southeast market in USA is extremely fragmented with the company garnering 12% market share. Also, changes in consumer preferences, spending trends, growth rates for automobiles, trends in travel and tourism have an impact on earnings.

The Pantry is actively pursuing a policy of acquisitions and store upgrades in order to boost growth and improve revenue. It has been posting an average revenue growth of 27% for the past 8 quarters. During 2006 the company incurred a capital expenditure of $97 million towards remodeling of existing stores and acquisitions of 115 stores. Total revenues for financial year 2006 witnessed an increase of 25%, thanks to a 10% rise in gasoline retail price and valuable acquisitions.

For year 2007, the company has projected a capital expenditure of nearly $115 million for remodeling 200 stores, increased its IT spending and plans to acquire 100 more stores. While a larger-scale acquisition appears challenging given market fragmentation, the company currently has a very strong pipeline of opportunities in the southeast region.