Back to top

Image: Bigstock

Bull Of The Day: Noodles & Company (NDLS)

Read MoreHide Full Article

Noodles & Company (NDLS - Free Report) went public in June of 2013 and has had a rough ride. The stock is down almost 80% since its, IPO but I believe that this trend is about to reverse. The company is starting to gain momentum with a stronger than expected quarter and management raising its EPS guidance for the year by over 14%. Sell-side analysts took this queue and raised their EPS estimates for both this year and next propelling this stock into a Zacks Rank #1 (Strong Buy).

NDLS is a risky investment, let me add, but with high risk comes high reward. They have a massive amount of debt that they may not be able to sustain going forward unless the firm starts turning a consistent profit. But analysts are optimistic about strong EPS growth with full-year EPS expected to grow 700% this year and 65% in 2020.

Noodles & Co (blue) is trading at 0.75x P/S which is far below the firms high of 3.05x in 2013, it is also trading below its peer group average P/S of 0.81x.

 

 

Since its bottom in April, NDLS has grown 33%, the start to what I believe could be a very long and robust rally as this firm expands its store count. Comparable store sales had grown 3% year-over-year, showing a glimpse of sunshine in light of 19 store closures in 2018. Most of those closures came at a time when the building leases were ready to expire. Noodles & Co didn’t close any stores in 2019 and with the recent positive performance, they are planning on opening 4 to 6 new restaurants this year.

Once NDLS starts to show some solid growth in store counts, I believe this firm will see some substantial bottom-line growth that will be relayed to investors.

Menu innovations have driven noodle & Co's recent growth, with a focus on healthy and plant-based diets. The primary consumer in this category is the millennial generation, who have a focus on a healthy living, which includes healthy eating. This is something that Noodles & Co can and has capitalize on.

Take Away

NDLS has a market cap of $352 million, right on the edge of micro-cap and small-cap. This means this stock is going to see much more volatility than large firms as well as less liquidity. This is a risky investment, but I believe that this stock has hit its bottom and is only moving up from here. This is an opportunity to get into this revitalized firm on the ground floor.

 

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Noodles & Company (NDLS) - free report >>

Published in