Noodles & Company (NASDAQ:NDLS)

CAPS Rating: 1 out of 5

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Member Avatar regotoguy (99.65) Submitted: 7/22/2014 5:43:55 AM : Underperform Start Price: $28.52 NDLS Score: -1.54

Bankruptcy 2015

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Member Avatar TMFInnovator (34.52) Submitted: 6/3/2014 12:40:35 PM : Underperform Start Price: $32.70 NDLS Score: +14.15

After noodling on this for a bit, I'm not loving what I see here..

- I've only eaten at a Noodles & Co once. The food wasn't very good, and it actually took awhile to prepare (they delivered it to my table, rather preparing it quickly while in line). I don't expect I'll go back.
- I don't buy their "Category of One" concept either. I see what they're trying to do - uniting different cultural cuisines. But I still think that more specialized fast-casual restaurants (PeiWei, Panera, etc) will better appeal to customers.
- The company blamed "unprecedented weather" for their 1.6% DECLINE in Q1'14 sames-store-sales. Even if that's true, I hate it when management blames the weather for poor results. Especially for a 'growth' company.
- Speaking of that, their growth runway is dubious. NDLS claims to have a potential of 2,500 restaurants nationwide. But they only have approximately 400 in place today, and are building nearly 60 per year. At that pace, it would take 35 years to reach saturation (!). And it's not like Noodles could just massively deploy capital to grow faster. Opening new restaurants takes time -- namely identifying good locations and hiring the right staff. Employees give the company 3.3/5 stars on Glassdoor.

Noodles & Co is just barely profitable today, and still has a forward P/E of nearly 50. There are a lot of growth expectations built into the stock price, and I can't help but think that Chipotle's ShopHouse concept is going to eat their lunch.

Low margins, overvalued, and uninspiring customer reviews. Underperform.

http://files.shareholder.com/downloads/AMDA-1X26IN/3213501348x0x751344/1cc0f4eb-f7a0-423e-b79c-3631bb6ac9ce/NDLS%20Baird%20Conference%20Presentation.pdf

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Member Avatar AtomicBlicky (22.24) Submitted: 5/27/2014 9:47:05 AM : Underperform Start Price: $33.72 NDLS Score: +17.56

Corporate Noodle company!! Hahahahahah

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Member Avatar jtallenmd (99.58) Submitted: 5/7/2014 1:41:29 PM : Underperform Start Price: $32.31 NDLS Score: +16.04

I really like these restaurants, but I do think their meals are overpriced for what you get. I also think the stock is overpriced at the moment. I think a more realistic value is $12.

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Member Avatar rhrehak (< 20) Submitted: 4/29/2014 2:49:21 PM : Outperform Start Price: $36.00 NDLS Score: -24.86

Great concept, good growth rate, lots of room for growth

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Member Avatar MKArch (99.71) Submitted: 1/31/2014 8:55:44 PM : Outperform Start Price: $36.45 NDLS Score: -31.00

My NDLS pick is based on a lesson I think I learned from my years as a H.G. sub, missing out on BWLD and CMG. Coming from an area where there are excellent choices for Buffalo Wings all over the place I could never understand how a wing franchise would take off nationally. Then again, the one and only time I ever tried Dominoes Pizza, I thought it tasted like cardboard and yet it seems to have done pretty well. What do I know? In my evolution as an investor though, I am coming to see the value of getting in on new franchises. In the past I focused on beaten down turn around stories or once in a while a new technology potentially on the verge of massive growth where the potential is rapid growth at some point in the near to mid term. With a franchise (done right) it looks like the opportunity is maybe a little less explosive growth but more methodical and longer term growth.

With that in mind, when I saw NDLS being discussed in CAPS; and figured due to the interest, it was probably a recommendation in one or more of the TMF newsletters, I decided to take a look. In order to get a sense of where this one could go I decided to do a crude model using CMG as a basis for scaling NDLS up over the next 10 years. In 2004 CMG had a similar number of stores as NDLS has now, so I used that as the base year and then compared how revenues and expenses grew from then until 2011 or over 8 years. I then extrapolated the same or a little more conservative growth rates to NDLS but over 10 years to add in a safety factor. I got ~$5.6/ share in earnings in 10 years. Currently CMG is trading for 56X earnings. I don't feel comfortable assuming that high of a P/E, so I ball parked NDLS could do 20X-30X earnings at that point for ~$112-$168/ share. That works out to nearly 12%-17% return per year. I also did a DCF using the same 10 year growth rate and ball parked earnings doubling over the following 10 years (11-20) before a terminal rate of 3%. That got me to a fair value of ~$43/ share or ~19% better than the current price tag.

Too me this one looks moderately undervalued based on reasonable expectations and could be a high flier if things go better than reasonable expectations. It's definitely worth following in CAPS and I decided to add a stake to my real life portfolio as well.

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Member Avatar thequast (80.08) Submitted: 1/3/2014 12:44:53 PM : Outperform Start Price: $35.97 NDLS Score: -27.63

As a value investor, it's hard for me to be bullish on the stock because I get hung up on the p/e. But when I analyze the business model, the execution, and the expansion I have no choice but to think this will be a long-term winner. Will the market give a better entry point eventually? Possibly, but as fast as this company is growing there's no guarantee.

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Member Avatar rseeleyco (< 20) Submitted: 12/29/2013 3:15:00 AM : Outperform Start Price: $35.31 NDLS Score: -25.55

just eat there! not many places better

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Member Avatar TMFJMo (69.16) Submitted: 12/26/2013 2:15:10 PM : Underperform Start Price: $33.80 NDLS Score: +21.93

http://caps.fool.com/Blogs/looking-back-and-looking/907100

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Member Avatar ltauro (< 20) Submitted: 12/10/2013 11:39:06 AM : Outperform Start Price: $38.28 NDLS Score: -33.60

Same group that started chipotle,should be able to get this off the ground.

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Member Avatar Flygal5 (99.01) Submitted: 11/28/2013 2:14:17 PM : Outperform Start Price: $41.03 NDLS Score: -38.43

Thanks to pencils2 for the write up on this stock. Lots of long term CMG personnel working for this recent IPO. The valuation is SCARY, and it will have some ugly dips along the way because of the valuation. But I want to back this team for the long run.

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Member Avatar klarcbarr (32.08) Submitted: 11/13/2013 7:33:55 AM : Outperform Start Price: $43.91 NDLS Score: -46.27

Noodles has found a popular fast food segment that had not been previously wrapped in a chain concept. The low cost per serving should secure profitability for Noodles, even if management and execution is only mediocre.

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Member Avatar Gunnarsdaddy (43.11) Submitted: 11/11/2013 2:51:54 PM : Outperform Start Price: $43.17 NDLS Score: -44.39

I've eaten here, and I love Noodles. The stores that I've been in are all clean and look 'new' (they won't need to renovate for a long time), they're kid friendly (my son LOVES Noodles!), the food is great, service is great, wait times are minimal. While their financial sheet isn't fully fleshed out, they have a higher margin vs. industry, a solid expansion plan, and I think they'll grow well in the next 5 years.

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Member Avatar PhilipS (38.05) Submitted: 10/7/2013 12:28:25 PM : Outperform Start Price: $44.40 NDLS Score: -52.47

Given the similarities to already massively successful casual dining chains like Chipotle Mexican Grill and Panera Bread, Noodles & Company is a restaurant chain that is still very much in the early stages of growth. With a diverse menu and attractive price points, the company should find continued success as it looks to rapidly increase its store count in the coming years.

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Member Avatar VirtualToro (84.29) Submitted: 9/22/2013 12:17:04 PM : Outperform Start Price: $44.07 NDLS Score: -50.18

good management, targets best demo for growth

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Member Avatar Bish53 (< 20) Submitted: 9/1/2013 4:52:29 PM : Outperform Start Price: $46.16 NDLS Score: -56.82

cuz of expansion

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Member Avatar HarryCarysGhost (99.70) Submitted: 7/21/2013 10:58:43 AM : Outperform Start Price: $43.10 NDLS Score: -49.45

Putting this on Caps as a reminder to try their noodles...

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Member Avatar CommonScents (56.42) Submitted: 7/18/2013 1:45:29 PM : Underperform Start Price: $43.79 NDLS Score: +50.95

IPO enthusiasm. Fundamentally, its a somewhat unproven restaurant model in an incredibly competitive space. I will be shocked if it's able to grow into its 400+ PE.

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Member Avatar dkataja (< 20) Submitted: 7/16/2013 1:39:09 PM : Underperform Start Price: $41.77 NDLS Score: +48.76

Huge potential to grow and enter the price range of a Panera or Chipotle, but in the immediate term, there's going to be some volatility to ride out

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Member Avatar deedunn29 (< 20) Submitted: 7/4/2013 11:59:59 AM : Outperform Start Price: $47.00 NDLS Score: -59.96

top notch management
good menu
busy restaurants
lots of growth 300+ now 1400 programmed

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