Juice Is in Jamba

Many investors jumping on the Jamba Juice bandwagon are basing their optimism on a back-of-the-envelope calculation about the smoothie chain's financial prospects.

But much of the analysis is being extrapolated from nearly two-year-old unaudited financial statements that the San Francisco-based chain filed with California state regulators. Even using those dated figures, an argument can be made that the stock is fully priced.

It will probably be another week before Jamba Juice releases updated information about its recent earnings, as part of the company's proposed merger with the so-called blank-check company Services Acquisition Corp.(SVI Quote). The $358 million deal is being hailed by some as an innovative way for investors to get in on the ground floor of a company that has aspirations of doing for the blendered juice drink business what Starbucks(SBUX Quote) did for coffee.

Without those figures, there's scant information available with which to analyze the privately held company. Management has kept mum. That silence is leaving a lot of room for speculative trading in shares of Services Acquisition, which are up about 49% to $11.10 since the deal was announced on March 13.

Several market professionals who have taken an interest in the Jamba Juice saga estimate that, on the basis of the company's unaudited financials, the company earned about $13 million on an operating basis in 2005. If that's the case, then on a fully diluted basis, Jamba Juice generated earnings about 20 cents a share. That calculation then translates into a price-to-earnings ratio of 58, which is comparable to the multiple that shares of Starbucks trade at.

Of course, Starbucks, with a considerably longer track record as a public company, dwarfs Jamba Juice on a market-capitalization basis. Starbucks has a current stock market value of $28 billion. On the basis of today's trading, Wall Street is giving Jamba Juice a market cap of about $726 million.

"I'm a big fan of Jamba, the concept and the product,'' says Robert Bexton, an analyst with Moirai Capital Management, a San Francisco hedge fund. "But the stock appears expensive where it is.''