Popeye's Louisiana Kitchen (PLKI)

Market Cap: 1.36B
Sector: Restaurants
EPS Growth This Year: 13.5%
EPS Growth Next Year: 17.49%
Sales Growth Q/Q: 11.30%
ROE: 64.6%
Gross Margin: 66.1%


Popeye's Louisiana Kitchen has strong metrics for sales growth and profits. They expect earnings per share to increase in the high double digits for the next 5-years. Boasting a stellar 64.6% Return on Equity and 66.1% Gross Margin, PLKI has the numbers in place to be a consistent winner going forward.

The stock has been consolidating near its all-time highs for 14-months, this has occurred after a very strong second half of 2014 where it gained 50% from September through February of 2015.

Despite the overall market's weakness and volatility, PLKI has continued to press against its highs. Since the beginning of 2016 the SP500 has declined -7%. PLKI has gone from a price $57 to nearly $61 over the same timeframe, a gain of +6.5%. This shows tremendous out-performance and Relative Strength, which is exactly what I look for when choosing a new investment.

While the overall market is trying to find support, PLKI is making new 40-week highs.

+PLKI WEEKLY

January 29th is the close of the month, the worst starting month in the history of the US stock market. Meanwhile PLKI is setting new monthly closing highs and is displaying very constructive behavior.

+PLKI MONTHLY

I like how this stock has pulled back to the rising 20 Month SMA. This is a very important bull market indicator. When the moving average is rising and price is above it is said to be in a secular uptrend. This is exactly what we are seeing here. Price is also kicking right off that line suggesting its ready to begin its next leg higher.

My indicators align nicely here as the stock is setting new all-time Relative highs vs the SP500.

The weekly MACD line has also reset to Zero, is positively crossed and turning higher.

The risk/reward is largely in our favor. Since the sideways action has been relatively tight, we can place our stops just below the pivot at $56.45. This means we are only risking 8% for potentially limitless upside.

In a market struggling for growth and positive stability, Popeye's Kitchen is a rare bright spot. As investors our job is to position our capital into the highest probability opportunities. PLKI is giving us resiliency to downside volatility and strong relative performance. Now is a great opportunity to buy into a market leader after a healthy and stable digestion of a long-term uptrend.