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TMFPostOfTheDay (< 20)

Noodles Getting Crushed



August 14, 2014 – Comments (1) | RELATED TICKERS: NDLS

Board: Pencils Palace

Author: TMFPencils

Noodles & Company (NDLS) shares are getting crushed pre-market by more than 20% to below $20 a share. Ouch. Noodles' 2Q 2014 results left a lot to be desired. Modest sales growth (11.5%) came solely from the opening of new restaurants. The company saw comps decrease year-over-year. Net income decreased slightly. To top it off, management reduced its guidance for the rest of 2014. Yes, "ouch" is about the best word I can think of at this point.

Not that we needed it, but this is another reminder of how superior Chipotle is as a restaurant and a business.

If shares of Noodles do drop below $20 today, the company's market cap will fall beneath $600 million. Even with a sharp drop in price, I don't see Noodles as an attractive investment opportunity at this point. Chipotle continues to dominate the fast casual space and still has a significant growth runway ahead of it. Noodles, on the other hand, is now seeing traffic decreases (i.e. less people visiting its restaurants now than at the same time last year) and continues to produce negative free cash flow.

I am still watching Noodles, but each quarter the story has gotten more grim for the company. I'm happy to remain on the sidelines for now.

David K

1 Comments – Post Your Own

#1) On August 15, 2014 at 10:32 AM, griderX (97.33) wrote:

Over the last year or so there has been euphoria of buying and valuing these new restaurant IPOs way to high and billing them as the next CMG...guess what if you want the next CMG buy CMG!

I red thumbed all of these companies NDLS, PBPB and the most recent LOCO!  Once realization sets in and Same Store Growth numbers drop to the single digits or negative in some cases all sorts of alarms should go off for any shareholders of these companies.



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