IPO Watch: Is This the Next Chipotle Mexican Grill, Inc. (CMG)?

For one thing, Chipotle Mexican Grill, Inc. (NYSE:CMG) (and Panera) have net cash on their balance sheet; Noodles has net debt, to the tune of $99 million. In fairness, the company plans to use $66 million of the IPO proceeds toward paying down some of the debt. Furthermore, Noodles’ gross and operating margins are only a bit more than half of Chipotle’s (and Panera’s.)

Foolish investors know that IPOs are a beauty contest and are, as a result, skeptical of the “value proposition.” At the $16 midpoint of the new pricing range, shares of Noodles & Company would be valued at 52 times trailing normalized earnings per share, or 31 times tangible book value per share. In this case, that skepticism looks richly deserved.

The article IPO Watch: Is This the Next Chipotle? originally appeared on Fool.com and is written by Alex Dumortier, CFA.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.