Why the Oliver’s Real Food Ltd share price rocketed 30% higher today

Much to the delight of its shareholders, the Oliver’s Real Food Ltd (ASX: OLI) share price has been one of the biggest movers on the local market today.

At the time of writing the recently listed organic fast food company’s shares are up a massive 30% to 43.5 cents.

Impressively, today’s jump means that its shares are up 50% in the last five trading sessions and 117.5% since its IPO last month.

What happened?

The company has been busy in the last 24 hours and made two market sensitive announcements.

The first was made after the market closed yesterday, revealing that Oliver’s has secured another strategic location in Queensland.

This location is about 255 kilometres north of Brisbane on the Bruce Highway at Maryborough. The company will pay $2.2 million for the acquisition and will fund it entirely from the proceeds of its IPO.

The acquisition is expected to generate revenue of $1.5 million and EBITDA of $0.25 million in the first full year of operation.

The second announcement, released this morning, was that it has now opened its first Queensland-based store on the Cunningham Highway at Aratula, approximately 88 kilometres south of Brisbane.

Should you invest?

Whilst I do think that these developments are positive, I’m not sure they really justify such an increase in its share price. Especially given how expensive its shares are already.

With a total of 209 million shares outstanding and a share price of 43.5 cents, Oliver’s now has a market capitalisation of $90.9 million.

In FY 2018 the company has forecast a net profit after tax of $2.4 million, which means its shares are changing hands at approximately 38x forward earnings now.

I feel this is a little expensive and see greater value in the shares of fast food rivals Domino’s Pizza Enterprises Ltd. (ASX: DMP) and Collins Foods Ltd (ASX: CKF).

Alternatively, these growth shares could be even better options for investors today.

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Motley Fool contributor James Mickleboro owns shares of Collins Food Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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