Collins Foods (ASX:CKF): At less than 8x EV/EBITDA, this stock looks finger lickin’ cheap

Collins Foods (ASX:CKF) is one of the few opportunities for ASX investors in the fast food industry. It has a reputation for being resilient to economic downturns, because cash-strapped consumers will theoretically turn to these outlets. Many fast food stocks such as McDonalds were amongst the few stocks to see sales growth during the GFC.

It is nonetheless as a pivotal point as it has gained over 30% this year. After being resilient to high inflation, unlike Dominos (ASX:DMP), the company felt the pinch for a while (i.e. for most of 2024). But a trading update given at its AGM earlier this week shows the worst might be behind it.

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Collins Foods (ASX:CKF) has been listed on ASX since 2011

Collins Foods operates KFC and Taco Bell Restaurants in Australia, Germany and the Netherlands as well as the Sizzlers restaurant in Thailand and Japan. It began in 1968 in the USA, owning stores in America and Australia, relocating Down Under in 2005 after it was acquired by Pacific Equity Partners (PEP).

CKF listed on the ASX in 2011 at $2.50 when Pacific Equity Partners (PEP) wanted to exit and similar to other IPOs where bigwigs are selling – it did not start well.

A poor start, but a good recovery

Collins Foods downgraded its profit forecasts only weeks after listing, by over 25%. It took until early 2015 for the company to surpass its IPO price, but has traded above it ever since. The catalyst was acquisitions that generated revenues and that scaled up in their own right, but also provided platforms for store expansions in new regions. It also divested many (but not all) of its Sizzlers stores, which had gone bankrupt in the US in the 1990s and were left behind in Australia by new competitors, such as Grill’d and Guzman & Gomez.

After a few years of growth, the COVID pandemic presented several challenges for Collins Foods. The most prominant of these were lockdowns that closed food courts where its KFC and Taco Bell outlets were. The company had to make do with offering take-away service either from its stores or through delivery services. Compounding to investors’ raised eyebrows, just 3 months into the pandemic, was the retirement of long-term Graham Maxwell and his replacement with then COO Drew O’Malley.

CKF managed the post-pandemic period well, then not so well

In FY22 (the 12 months to June 30 2022), Collins Foods delivered $1.2bn in revenue (up 11% from FY21), $207.2m in EBITDA (up 13%) and a statutory NPAT from continuing operations of $54.8m (up 47%). Obviously, the vaccine rollout and removal of restrictions helped. But so did the consolidation of its market position in the Netherlands – the company bought out the second largest franchisee in the market that expanded its footprint by 25% to 44 KFC restaurants and to more than half the market.

Topline growth continued into FY23, with revenue increasing 14% to $1.35bn, although its profit came in at just $11.3m given a $36.7m impairment to Taco Bell. EBITDA was flat at $205.1m.

FY24 saw record revenue, $1,448.9m with growth across all divisions. Its EBITDA was up 12% to $229.9m, its underlying profit was up 15% to $60m with its statutory profit being $76.7m – a figure way higher than $12.7m in FY23, but FY23 was deflated by the $36.7m impairment of Taco Bell whilst FY24 was inflated by the sale of Sizzler Asia. The company managed to reduce its net debt from $212.2m to $165.5m.

But…the company revealed to investors that trading conditions were softer due to inflation and this would hit the bottom line. And adding insult to injury, O’Malley had announced his resignation just 2 weeks prior. Investors liked his leadership, but as with any popular CEO, whenever the boss departs can lead to a period of uncertainty.

New CEO Xavier Simonet told investors among his priorities would be reviewing the growth strategy and delivering profitable growth.

CKF’s customers are coming back with a vengence

FY25 results told investors what they already knew – that margins were down. Its revenues broke a record again, up 2.1% to $1.5bn. But underlying EBITDA was flat at $228.5m, EBIT was down 5.7% to $117.1m and its underlying profit was down 14.8% to $51.1m. Its statutory profit was just $8.8m due to impairments. It cut its dividend slightly, but this enabled it to take its Net Leverage Ration below 1. The company told investors tax and interest rate cuts were starting to support improvements in consumer setiment.

Yesterday, at its AGM, the company issued a trading update for the first 18 weeks of FY28 (late April to late August 2025). Total sales were up 6.7%. KFC sales were up 5.1% in Australia, 4.8% in the Netherlands and 8.4% in Germany. Its FY26 profit guidance was expected which was low to mid-teens percentage growth. Investors were pleased and sent the company up 7%. It is still below the $12.33 price it peaked at in January 2024, but it is up over 35% since bottoming out in June 2025.

The 13 analysts covering the company expect $1.6bn revenue, $244.7m EBITDA and $0.49 EPS in FY26, followed by $1.7bn revenue, $266.6m EBITDA and $0.61 EPS in FY27. The estimates derive an EV/EBITDA of 7.8x, a P/E of 19.2x and a PEG of 1.4x. For comparison’s sake Dominos has practically same EV/EBITDA but is stagnant (although its P/E is only 11x), whilst Guzman y Gomez is 29x EV/EBITDA and >100x P/E even after doubling after its IPO but crashing back to earth.

Bottom line

The KFC slogan is that its chicken is “finger lickin'” good. Does this same slogan rings true to the company as an investment right now? Our answer this time last year would have been not right now, but it is a different story now. Still, investors should be cautious that the company’s recovery is a work in progress, and there may be further downside if things take a turn for the worse before they get better.