Cramer: Extensive Remodeling Paid Off

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Redesigning a store is a tricky thing to navigate. But Cramer said this company has done it well.

"Last year, AFC Enterprises decided that its Popeyes stores needed a facelift," Cramer explained. Since that time the company has remade 35% of its domestic locations, transforming them into Popeyes Louisiana Kitchen, an homage to the company's origins.

"These remodeled restaurants are seeing sales volumes that are four percentage points higher than the system average, a very nice bump," Cramer said.

And the company intends to redesign substantially more stores. "By the end of the year, AFCE expects to have remodeled 60% of their domestic stores," Cramer explained.

And even though shares have climbed more than 30% ytd, Cramer expects the advance to continue. "I think on that metric alone (remodeled restaurants generating higher sales) there's still a lot of upside left," Cramer explained.

Construction worker remodeling
SpxChrome | E+ | Getty Images

The latest earnings seem to confirm the trajectory.

In a report released earlier in the week, the company said it now expects full-year earnings and same-store sales growth to be at the upper end of its prior projections of $1.37 to $1.42 a share and 3% to 4% growth, respectively.

For the period ended April 21, AFC posted a profit of $9.6 million, or 40 cents a share, up from $8.3 million, or 34 cents a share, a year earlier. Excluding the impact of legal fees related to licensing arrangements, year-ago earnings were 35 cents a share. Analysts polled by Thomson Reuters most recently projected earnings of 40 cents a share for the latest period.

Total revenue increased 14% to $60.4 million.

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"Those are strong results," said Cramer. "Most restaurant stocks are played out, largely they have to raise prices. AFC Enterprises, however, appears to have more growth. I think it's the cheapest restaurant growth story out there."

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