Jersey Mike’s stock is down 12% since Danny Devito’s favorite sub rang the bell to IPO in July… and its CEO,  Charlie Morrison believes investors are overlooking the sandwich chain's growth potential.

The company went public at $21 per share, but investors haven't shown much enthusiasm since. Shares fell as low as $16.09 in early October before recovering to around $18 by the end of the month.

But according to Morrison, the selloff doesn't reflect what's happening inside the business.

"While the stock has been challenged, we think the shares are generally undervalued," Morrison told reporters.

And looking at the company's latest results, he has a few reasons to be optimistic.

Jersey Mike's recently reported its 20th consecutive quarter of positive same-store sales growth, with comparable sales increasing 3% during the third quarter.

Customer transactions also increased, while the company's restaurant count grew 9% from a year earlier.

Those are encouraging numbers for a restaurant chain operating in an environment where consumers are becoming increasingly careful about spending money.

However, the results weren't quite strong enough for management to maintain its full-year outlook.

Jersey Mike's lowered its annual forecast, with Morrison pointing to weaker consumer sentiment during September and October as higher interest rates and fuel prices put additional pressure on household budgets.

So how does the company plan to get sales growing faster, you ask?

For starters, Jersey Mike's sees a big opportunity in catering, a business that has already been growing way faster than its traditional restaurant sales.

Catering revenue has increased 17% so far this year and now represents about 4% of total sales, up from 3% historically.

That might not sound like much, but management believes there's plenty of room to expand into corporate meetings, office lunches, and other group events.

"Sandwiches are very portable," Morrison said. "They're used for lunch events all the time and we think Jersey Mike's should be a leader in the catering side of the business."

And he's not alone in seeing the opportunity.

TD Cowen analyst Andrew Charles recently expressed optimism about the company's long-term prospects, arguing that Jersey Mike's menu is particularly well-suited for catering.

But management isn't stopping there.

Jersey Mike's is also exploring something that could change when customers visit its restaurants: staying open later.

Most locations currently close around 9 p.m. or 10 p.m., depending on the franchisee, meaning the chain misses out on customers looking for food later in the evening.

Morrison knows that market particularly well, having previously served as CEO of Wingstop, where late-night dining was an important part of the business.

"I was with Wingstop for many years, and we were open late and knew that younger audience really, really well and knew what they're craving during that time frame," he said.

The company plans to test extended hours before deciding whether to introduce them store-wide.

Meanwhile, Jersey Mike's is also trying to give shareholders another reason to stick around.

The company recently announced a share buyback program, which Morrison says demonstrates management's confidence in the sandwich chain's future.

And with shares trading well below their $21 IPO price, management clearly sees an opportunity to buy back stock at a discount.

Still, a buyback alone isn't going to convince investors to come back for seconds.

Jersey Mike's needs to show that catering, new restaurant openings, and longer operating hours can translate into stronger profits.

And until that happens, investors might be content to keep ordering the sandwiches instead of the stock.

At the time of publishing this article, Stocks.News doesn’t hold positions in companies mentioned in the article.