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IPO Report: Noodles (NDLS)

By  +Follow June 27, 2013 11:53AM

Based in Broomfield, CO, Noodles (NDLS) scheduled a $76 million IPO with a market capitalization of $399 million, at a price range mid-point of $14 for Friday, June 28, 2013.

  • S-1 filed June 20, 2013
  • Manager, Joint Managers: Morgan; UBS
  • Co-Managers: BofA Merrill; Jefferies; Baird; Piper Jaffray


NDLS is a high growth, fast casual restaurant concept offering lunch and dinner within a fast growing segment of the restaurant industry.

However, it has a low after-tax profit margin: 1% for Q1 2013, 1.7% for calendar 2012. Q1 '13 revenue was up only 16% vs Q1 '12.

NDLS plans to grow its restaurant base in the range of only 10% next year.


Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing Q1 '13

Cap (MM)





in IPO








P/E based on 2012 results, business is seasonal




Valuation comparisons
Price-to-earnings: NDLS is the highest
Price-to-sales: NDLS is the lowest
Profit margin: NDLS is the lowest



Price /

Price /

Price /

Price /


comparing 2012 results because NDLS is seasonal






Margin %








Chuy's Holdings (CHUY)







Panera Bread (PNRA)







Chipotle Mexican Grill (CMG)







NDLS has by far the lowest profit margin, which is a competitive disadvantage.


NDLS business model generates the lowest profit margin in vs the comparables. Revenue was up only 16% for Q1 '13 vs Q1 '12, and NDLS plans to open only 10%+ restaurants in the next year. NDLS has the highest P/E ratio vs the comparables.

Potential store expansion to 2500 in 15 to 20 years suckers in investors, even though NDLS's profit margin's are very low, in the range of 1.5%. Some institutions just want to participate in the sector. However, NDLS is no CHUY, which IPO'd last year at a different stage of growth and is up 192%.

Nevertheless, NDLS is a buy on the IPO mostly based on management's Chipolte background. To put the above conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced earlier:

Growth plans

"From 2004 to 2012, we increased the number of our total restaurants from 100 to 327, representing a CAGR of 16.0%. If we continue to grow at our current rate, we believe we have the opportunity to grow to 2,500 restaurants across the United States over the next 15-20 years."

Growth to 2,500 restaurants in the next 15-20 is a very dubious assumption.

It's easier to show percentage growth from a smaller base. For example, perhaps NDLS grew at a CAGR rate of 16 since 2004, but a year after its IPO it is planning on growing only 10%. Q.E.D.

Margin issue

In terms of after-tax profit margins, compared to other restaurant chains NDLS is not a very good operator.


NDLS is a high growth, fast casual restaurant concept offering lunch and dinner within a fast growing segment of the restaurant industry.

Comparable restaurant sales increased by 5.4% system wide in 2012, which was comprised primarily of traffic growth and a 1.3% menu price increase.

Fast casual

NDLS operates in the fast casual segment of the restaurant industry. According to Technomic, in 2011 the 150 largest fast casual concepts grew sales by 8.4% to $21.5 billion, compared with 3.5% for the 500 overall largest restaurant chains in the United States.


NDLS believes it the only national fast casual restaurant concept offering a menu with a wide variety of noodle and pasta dishes, soups, salads and sandwiches inspired by global flavors.

Growth plan

In 2012, NDLS opened 39 company-owned restaurants and six franchise restaurants. In 2013, NDLA has or plans to open between 38 and 42 company-owned restaurants and between six and eight franchise restaurants.


Although NDLS expects the majority of expansion to continue to be from company-owned restaurants, NDLS is strategically expanding the base of franchise restaurants, especially in markets NDLS does plan to enter in the short to medium term.

As of May 28, 2013, NDLS has 52 franchise units in 11 states operated by nine franchisees. Franchise partners plan to open between six and eight new restaurants in 2013.

"Grab a drink, have a seat and we will deliver your food to your table-all without the need to tip."

Restaurant investment model

NDLS's new restaurant investment model calls for a total cash investment of $725,000, net of tenant allowances. The current target cash-on-cash return on investments in restaurant development for a new company-owned restaurant is 30% in its third full-year of operations.

Company-owned restaurants that were open a full three years by January 1, 2013, achieved an average cash-on-cash return on investments made in restaurant development of 34.8% in their third full year of operations


Our revenue per restaurant is typically lower in the first and fourth quarters due to reduced winter and holiday traffic and higher in the second and third quarters.

5% Stockholders pre-IPO

Entities affiliated with Catterton Partners, 45%
Argentia Private Investments Inc., 45%

Use of proceeds

NDLS expects to net $67 million from its IPO. Proceeds are allocated to repay debt.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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Results for Noodles, NDLS, fast casual,
23 Nov 14 09:02:43
お化けはいません。 …いるよ(裏声) うわぁあああ!!!!!!!!
Tracy McGrady 2⃣.0⃣
23 Nov 14 09:02:41
@Slightwork_ if you put them noodles down you can drive 😂😂😂😂😂
23 Nov 14 09:02:41
@hugo4de @cat_noodles_ @georgella13 I dont know how.
Ashley Wiley
23 Nov 14 09:02:30
9th time going to Noodles and Co. ... this past 10 days
23 Nov 14 09:02:27
@PareliLust Ramen noodles are bae
isaac sieg
23 Nov 14 09:02:26
Eww and hard noodles make me throw up!
23 Nov 14 09:02:20
RT @AlexandraLSmit2: @hugo4de @cat_noodles_ @georgella13 @sweety5111 I will have to teach myself how to do that.
Brandon A. Campos
23 Nov 14 09:02:13
Florida St. Sporting the N7 uniforms. Their coach doesn't have that swag to sport the N7 Suit as Noodles did tho.
23 Nov 14 09:02:09
@WolfTheStormWiz im eating ramen noodles because that's all I can afford
23 Nov 14 09:02:07
football number 91 soccer number 19 surgery on the 19th hospital room number 19 coincidence, I think not
23 Nov 14 09:02:06
RT @hugo4de: . @cat_noodles_ @georgella13 @sweety5111 Hugo advice: put a watermark on your nice photos! we have evil #photothief s
23 Nov 14 09:02:01
Breakfast Singapore Noodles elizabethstreetcafe #atx @ Elizabeth Street Cafe http://t.co/JL1NuD6Qix
23 Nov 14 09:01:57
Guess noodles for breakfast
23 Nov 14 09:01:30
come thru and let's go get hakka noodles 😭 cravings are real @AbrahamsZayaan
Esteban Garza
23 Nov 14 09:01:00
@gracieelenaa seriously #noodles&co #izzies #loganscookies #cornrows
23 Nov 14 09:00:47
Gonna Play Some Cod : Advanced Warfare!? 💃👌☺️
Aniston Poage
23 Nov 14 09:00:21
Walking out of the kitchen with my bowl of roman noodles and the whole bowl falls out of my hand and all over the floor😑
Caitlyn Rigby
23 Nov 14 09:00:20
Ramen noodles it is..... 😩
Zachy T.
23 Nov 14 09:00:18
RT @MarshalBlank: Life without @andieacoustic is like eating Ramen Noodles without the seasoning packet.
23 Nov 14 09:00:12
@noodles_junk やらんといっとろうがぁ。わたてぃスカイプそのものが好きじゃないんだぁ。
23 Nov 14 09:00:10
@kaelapl eat some mr. Noodles and rolo ice cream 💕
G. Money
23 Nov 14 09:00:06
Getting some much needed soup dumplings :) (@ Everyday Noodles) on #Yelp http://t.co/xalsQvHcwi
مايا مولتون
23 Nov 14 09:00:05
my ghetto ass headphones look like ramen noodles. http://t.co/SVahxTF5AR
Amanduh Gloor
23 Nov 14 09:00:05
I just realized the grocery stores are gonna be a nightmare, and I just need hot pockets and Ramen noodles for the week. #groceryshopping
23 Nov 14 08:59:56
Ima Spend The Whole Day With Him 💕😊
23 Nov 14 08:59:47
RT @xx925amyxx: “@Taank_3: Girl your hair looks like noodles” @d0llyherry_
Joylyn ヽ(^。^)ノ
23 Nov 14 08:59:43
Omg i wanna eat noodles
23 Nov 14 08:59:38
@noodles_junk おっけーーーー!ヌードルちゃんの渋いリクエスト待ってるよ!ついでに解説もしてくれるとありがたい
Stuart Murray
23 Nov 14 08:59:34
one year since I was immortalised eating udon Noodles in Thought Bubble. http://t.co/58blX9T5MA http://t.co/VmhofFe6Kj
23 Nov 14 08:59:27
@real_KIMshadyxo is contributing to my noodles addiction http://t.co/nROx6zeyVL
Qt Bacon
23 Nov 14 08:59:15
Suddenly craving for noodles.
23 Nov 14 08:59:14
I wish they still made Cheddar Cheese cup of noodles, them be sooooooo goooood 😊😊
23 Nov 14 08:59:13
RT @Ke_SoDamnPretty: "@DarkskinDolly: finna make more noodles , 🍜"
Rip Sk .
23 Nov 14 08:59:03
Noodles for breakfast . 😂😂😂 bussin '
23 Nov 14 08:59:01
@madam_yvonne おk!
23 Nov 14 08:59:00
A fly killed itself in my noodles #notcool
puja p
23 Nov 14 08:58:55
Eating chow mein noodles. #yumm
23 Nov 14 08:58:53
I just woke up & Matt wants me to go over already . 😐
moammar boddafi
23 Nov 14 08:58:50
“@TFLN: (304): You spilled spaghetti on the floor, and kept telling the noodles to "settle down" as you tried to clean it up” @carlydonnis
Lacey Holder
23 Nov 14 08:58:02
Chicken n noodles is on my agenda today 🙌🐽🙋
soyun park
23 Nov 14 08:58:00
Meant to put some noodles in the microwave for a minute but i accidentally pressed 10... http://t.co/AY6JVvJqT5
23 Nov 14 08:57:52
Fuck Sunday bullshit..✋ I'm geeking out with Xbox and Ramen Noodles 🌚🍜
CF Adrian myhyv
23 Nov 14 08:57:38
"@Asolerlopez: Una de #Noodles en #Madrid #GranVia! @toStephen http://t.co/WLzhTwDs2R"
23 Nov 14 08:57:36
@noodles_junk ヌードルちゃん、おはよ!2時から予約枠でリクエスト放送やるから!洋楽・邦楽両方だよ~ 来てよぉ~ あとで、ツイッターに放送情報を貼るから!
23 Nov 14 08:57:33
@tressayeomans @maximummom totally is! ;-) Oh, and he ate a bowl of noodles, so that's good.
CF Adrian myhyv
23 Nov 14 08:57:30
RT @Asolerlopez: Una de #Noodles en #Madrid #GranVia! @toStephen http://t.co/2pRHQkWHbC
Randi McDonald
23 Nov 14 08:57:27
You know she's Fake if she says she Likes Indomie than Noodles
Paula Verano
23 Nov 14 08:57:10
after uminom noodles naman tapos 5am school
23 Nov 14 08:57:09
wanna eat 2 minute noodles and watch gossip girl but its 1am and i am not as strong as i used to be
23 Nov 14 08:57:03
"@DarkskinDolly: finna make more noodles , 🍜"
By  +Follow June 27, 2013 11:53AM



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