Mad Money

Cramer: Pizza wars! Which one brings the dough?

Cramer's pizza taste test
Cramer's pizza taste test

Fellow Cramericans may remember last month when Jim Cramer conducted burger wars to determine which burger stock would sizzle on the market. Now there is another space that has been heating up the competition—pizza!

Cramer was prompted to take a closer look at pizza stocks when he saw a full page ad taken out in USA Today on Thursday by Papa John's, which claimed that it was the next Chipotle or Panera Bread of pizzerias, because it has so many high-quality ingredients and few preservatives in its food.

"I think it's a terrific example of just how competitive the pizza space is getting. The major chains are all looking for any way they can to differentiate themselves from the competition," the "Mad Money" host said.

The pizza industry has really taken off lately. Pizza sales grew at 3 percent last year in the U.S., to $38.5 billion. Additionally, major chains like Domino's, Papa John's and Pizza Hut have stepped up the technology game to compete and take market share via mobile and online ordering.

So, what is the best way to play the pizza industry?

Five major chains dominate the market—Pizza Hut, Domino's, Papa John's, Little Caesars and Papa Murphy's. In reality, Pizza Hut is owned by conglomerate Yum Brand, and Little Caesars is privately held, so that leaves just the three remaining players.

"And guess what? If you owned any of these three stocks over the last year, you've made a killing," Cramer said.

Papa Murphy's is the newest of the bunch; it came public in April of last year. Cramer has liked this chain because of its growth and unique take-and-bake business model.

Then there is Papa John's, which is trying to be the Chipotle of pizzerias with its "better ingredients, better pizza" motto.

"That feels like a stretch to me, although I can't deny that they make good breadsticks," Cramer added.

Last, but not least, there is Cramer-fave Domino's Pizza, which has spiked more than tenfold since he started recommending it five years ago. Domino's is the top dog, with more than 11,700 locations and a large international franchise base. It has also crushed the competition with technology, where customers can even order via Twitter and text messages.

Ultimately, after crunching the numbers looking at same-store sales and revenue growth, it was clear to Cramer that while Domino's might be a superior operator, Papa Murphy's is the smaller up-and-comer with faster growth.

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But what about the stocks?

"For me, this valuation equation is the cincher. Not only is Domino's the best operator, but it's also got the least expensive stock, even up here at roughly $3 off its all-time highs," Cramer said.

So, the battle of the pizza has determined Domino's as the winner. Not only is it a bargain versus the competition, but Cramer recommends to buy, buy, buy Domino's and ring the register on some of your position on Papa Murphy's.

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