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EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Gad: Get to Know JACK

JACK's strategy is seeking to increase the number of franchise locations. The reason is obvious: Franchisees are equivalent to annuity like cash flows. From fiscal 2006 to fiscal 2011, JACK has grown its consolidated franchise revenues from $110 million to $280 million. EBITDA from those revenues in fiscal 2011 was $170 million -- a margin of over 60%. As the company continues to reduce owned locations in favor of franchised ones, margins increase, which tends to lead to higher valuation multiples.

Because JACK currently has all these moving parts, the true valuation picture gets confusing. But that will clear up over the coming years and, as it does, investors could potentially have a total share price above $50 compared with $28 today.

At the time of publication, Gad had no positions in the stocks mentioned.

Sham Gad is the managing partner of Gad Capital Management, a value-focused investment firm based in Athens, Ga. Gad has written extensively for The Motley Fool and was a securities analyst for UAS Asset Management, a small value investment fund in New York City, in 2007. From 2002-2005, Gad managed assets for the Gad Investment Group.

Additionally, Gad has just released a new book, The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett. He earned his BBA and MBA at the University of Georgia. Gad appreciates your feedback; click here to send him an email.

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