Chipotle Mexican Grill, Inc. (CMG), Panera Bread Co (PNRA): Why Is Noodles & Co (NDLS) an Attractive Buy?

Even Jim Cramer is infuriated at having overlooked this stock. Noodles & Co (NASDAQ:NDLS) issued its IPO last week, and it’s stock price has almost doubled in four days. What could the reason be for this? Is this upside just an illusion, or are the investors highly optimistic and confident about the future growth of the company? Let’s look at some of the company’s key points to reach a conclusion about its prospects.

Strong menu and management

Two people who were involved in the evolution of Chipotle Mexican Grill, Inc. (NYSE:CMG) as a fast food powerhouse are now with Noodles. CEO Kevin Reddy and CFO Keith Kinsey have an impressive and successful career graph along with 25+ and 30+ years of experience in the restaurant industry. This gives investors a strong reason to have faith in the company.

The company’s menu is attractive and is not only limited to noodles. It offers pastas, sandwiches, salads and soups too. The company has incorporated Mediterranean, Asian and American styles in its menu as well. With increasing concerns about calories, fats and gluten, Noodles & Co (NASDAQ:NDLS) has come up with menus where customers can customize their orders to meet their preferences.

Expansion plans

Noodles & Co (NASDAQ:NDLS) operates 343 stores, out of which 52 are franchisee-based. The company is in a rapid growth phase and wants to expand exponentially with an increasing fan base across the country. The company is looking for sites in 19 cities across the country where the daytime population is strong and residents have a median household income of over $50K. Successful entry in these locations should trigger a revenue upside for the company.

It is also worth noting that 120 stores have been opened in the past five years amidst the economic uncertainty in the country. The company has generated profits through a mix of self-owned and franchise outlets. Going forward, the company plans to increase the number of restaurants by 2,500 units in the next 15–20 years. Given the company’s aggressive expansion plan, it is very likely that it will adopt an asset-light model for expansion. If the expansion plan does materialize, investors can expect robust revenue growth through franchisee fees and royalties going forward.

Peer comparison

Considering the products the company offers, there are no direct competitors for Noodles & Co (NASDAQ:NDLS). However, comparisons against companies like Chipotle Mexican Grill, Inc. (NYSE:CMG) and Panera Bread Co (NASDAQ:PNRA) gives us an insight into the expanding market opportunities for Noodles.