Cramer's 'Mad Money' Recap: The Pizza Connection

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"Execution is something professional money managers always want to see in a stock," Jim Cramer told viewers of his "Mad Money" TV show Wednesday.

However, it can be tricky to compare companies with good execution vs. those with bad execution, he said. The best demonstration of execution is almost always in restaurants and retail, where execution is everything, he added.

Consider Domino's Pizza (DPZ Quote) and Papa John's International (PZZA Quote), Cramer said. "They're both in the same business, but one blows up and one gives us good execution."

Domino's was crying about how hard the environment is, while Papa John's did not complain and instead, on Nov. 6, beat its earnings estimates and raised its forecast, he said. Meanwhile, Domino's announced less than stellar estimates.

Both pizza companies have long-term growth rates, but Papa John's has a higher multiple because of numbers that are bankable, Cramer explained. It also has better visibility, which is "a multiple enhancer."

The multiple for Domino's, on the other hand, can't be as good because Domino's complained about the environment and didn't deliver good numbers, he said.

To determine the stock price of a company, investors must find out what the earnings will be and multiply them by the multiple, Cramer told viewers. In the case of Domino's vs. Papa John's, even if the earnings stay the same, Papa John's higher multiple means its stock deserves a higher price.

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