Jack on Track

Thinking outside the box at $JACK

A legacy of mismanagement

Can a technical analyst tell me if this chart looks good?

I like easy stocks—the ones that go up steadily with low volatility. This isn’t that. JACK 0.00%↑ is the other kind. The gross kind. The one where even if you nail it, it’s not worth the emotional turmoil, and if you fail, you were a fool for even trying.

But I need to write about it because it came up in our process and we’re nothing without process. You think I enjoy knife catching a stock that’s down 50% over the past year?

That said: caveat emptor. Ultimately, this thing might be a zero, but I think it’s worth a small swing if there’s a desire for high-octane fast food retailer action. My plan is to size small and add if the turnaround actually starts happening.

Let’s briefly discuss the fundamentals and then see what management’s compensation-implied forecast is.

The Numbers

Not great

There are a total of 2190 JITB restaurants, 152 of which are company-operated. Business has been pretty dismal across all of them. Oh, and as of 25Q1, there’s $1.7b in long-term debt against $247m in operating income. Not great.

The old CFO was promoted to CEO in February of 2025 and got to work on a turnaround plan.

The “Jack on Track” plan, announced 4/23/25, has several key pillars:

• Selling Del Taco

• Dividend to zero ($35m), focusing on debt paydown

• Share repurchases ($5-15m target in FY25)

• Selling some real estate, specifically sites leased to franchisees

• Slowing unit growth (CapEx $100m target)

• Cutting 150-200 underperforming restaurants (mostly from franchisees)

  • Management has little control over the end-market, but shedding underperforming stores will likely increase overall margins

I make zero assumptions about the impact of cutting underperforming restaurants due to the inherent ambiguity in doing so. Consider that optionality for the upside.

There’s more clarity on the debt paydown plan.

Sources of Cash for Debt Paydown:

• $200m from Del Taco

  • JACK purchased Del Taco for $585m in 2022 at a 1.2x revenue multiple

  • $200m implies a ~.2x multiple against $956m in revenue

• $34m from former dividends

• $21m from real estate sales

  • Crudely assuming 5% of PP&E monetized as a proxy

So overall that’s $255m against $1.7b of LT debt. That’s fairly close to the management target of $300m.

Back of the Napkin Scenario Assumptions:

• $300m paydown in debt

• Operating Income equivalent to FY24 at $247m

  • If underperforming franchisees are being cut, operating income might even go up, so this might be conservative

• Interest payments of $65m vs $80m FY24 (same rate, with $300m less on debt)

• Same pension expense as FY24

• 26% management guided tax rate

All that gets to $6.56 EPS, 25% higher than the FY25 $5.23 management-guided midpoint. At $27.22 per share, that implies a 4x P/E versus the the current forward 5x P/E.

That’s not a particularly inspiring increase in earnings, but P/E ratios also tend to increase as leverage decreases. If execution is good and the underlying business stabilizes, you could see a serious rerating. A 10x P/E is the rule of thumb multiple for a stable no-growth business, which already implies over a 100%+ return from current prices. An 8x ratio on $6.56 EPS would be enough to get to that hurdle on JACK.

The Board seems to think that there’s a pathway to hit a double sometime over the next three years, and they probably have a better view of the internal levers than we do.

The Board/Management Bet