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Masters of Execution: Papa John's

Management and its ability to execute are as important to a stock as earnings growth. But it can be hard to measure something as seemingly subjective as executive performance, Cramer said.

Usually, the best one-to-one comparisons can be found in restaurants and retail, where, according to the Mad Money host, management and execution are everything. And it’s in these two sectors that Cramer found a couple of the best examples of how important the CEO suite is to a company.

Domino’s and Papa John’s share the same business, the same tough macroeconomic conditions and the same high costs. But over the same period Papa John’s outperformed anyway and raised its full-year forecast. Domino’s CEO David Brandon blamed “unprecedented cost pressures and a weak consumer environment” for the company’s poor quarter.

This is why Papa John’s gets a 14 multiple and Domino’s gets an 11, Cramer said, even though both companies have the same long-term growth rate. The Street just has more confidence in Papa John’s after CEO Nigel Travis talked up the strength of the business, the buyback, strong free cash flow and growth opportunities. Papa John’s even updated its guidance on Dec. 7 to comfort investors who were worried about the market.

Cramer called that type of visibility and execution multiple enhancers. Remember, the price equals the earnings times the multiple: P = E x M. So if good execution increases the multiple, then even if the earnings stay the same the price goes higher.

“If you want to see the difference between good and bad execution,” Cramer said, “all you have to do is look at Papa John’s versus Domino's.”

Questions for Cramer? madmoney@cnbc.com

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