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

At the time when Chipotle Mexican Grill, Inc. (NYSE:CMG) issued its IPO, the company had around 489 restaurants to operate while Noodles closed the 2012 fiscal year with 276 restaurants. On the size front, Noodles is almost half the size that Chipotle Mexican Grill, Inc. (NYSE:CMG) was. However, the company has strong fundamentals with revenue growing at a compound annual growth rate of 11% from the 2010 to 2012 fiscal years and comparable sales growth of 5.4%. Moreover, the company is going from local to national and it still has the scope to go international.

If we analyze Chipotle, there a few threats to its revenue growth. Chipotle Mexican Grill, Inc. (NYSE:CMG) Mexican Grill sales in London have slowed; this is primarily because of the lack of awareness in the country regarding the Mexican food. Most of Chipotle’s offerings are at a price point which is considered high. Londoners prefer a more happening environment, and an unpleasant environment is another turnoff for Chipotle Mexican Grill, Inc. (NYSE:CMG). The Company is planning to offer new products which are more in sync with what customers want. This will take time, however, and will also increase the company’s expenses.

Panera Bread Co (NASDAQ:PNRA) is trading at 31 times its earnings for the 2013 fiscal year. An estimated growth of 16% for the 2014 fiscal year translates into a PEG, which suggests overvaluation. Panera Bread Co (NASDAQ:PNRA) has recently announced a cut down in its same store sales growth from 5.5% to 5% for the 2013 fiscal year. The company’s upcoming management change might also create uncertainty related to the company’s direction and its strategy for future growth and expansion.

Conclusion

This robust upside in price indicates that investors are willing to put in their money into fast-casual brands even when the market is volatile. Noodles & Co (NASDAQ:NDLS) being the first restaurant company which has gone public this year proves the point. With strong fundamentals, a unique menu, competent management and aggressive expansion plans, the company is likely to outperform its peers in the coming years.

The article Why Is Noodles an Attractive Buy? originally appeared on Fool.com and is written by Anjum Khan.

Anjum Khan has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill and Panera Bread. The Motley Fool owns shares of Chipotle Mexican Grill and Panera Bread. Anjum is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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