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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,
30 Oct 14 09:00:25
"@CashN0Checks: Oodles and noodles and ham RT @Tiff_Lips: What should I eat for lunch today??? I need suggestions"-___-
Mindy  Beall
30 Oct 14 09:00:16
This slow cooker "stoup" (a cross between soup and stew) is made completely in the slow cooker, noodles and... http://t.co/cC2xqcfk8W
Mindy  Beall
30 Oct 14 09:00:14
This slow cooker "stoup" (a cross between soup and stew) is made completely in the slow cooker, noodles and... http://t.co/QmBkKoZ8fX
Nicholas Andrade
30 Oct 14 09:00:06
I can smell the salty aroma of ramen noodles, but I don't see ramen noodles. I don't get the joke 🍜🍲🍴
Justen Greenwood
30 Oct 14 09:00:01
Special 1: Sirloin Tips over Noodles $7.99 Special 2: French Dip $6.89 Soup of the Day: Vegetable Beef Soup House Soup: Chicken Noodle
Branaye (Noodles)
30 Oct 14 09:00:01
I'm so hyper people are laughing a me it's funny
30 Oct 14 09:00:01
thanks for following me but i havent been to noodles and company for years
Stand Up
30 Oct 14 08:59:40
RT @OPSafeWinter: SHOUTOUT BIRMINGHAM UK 》 "@GillHeyes: @bswaid @opsafewinter #opsafewinter donations of pot noodles and other items neede…
myah ollek
30 Oct 14 08:59:38
RT @RachFlear: last night @myahollek broke her phone by spilling vodka on it and then dropped her charger in mr noodles #life
The Plaza At Bauan
30 Oct 14 08:59:36
Mongkok Dimsum and Noodles Bauan, Batangas uploaded their complete menu! Visit them at The Plaza at Bauan, J.P.... http://t.co/0jVxnYokSB
30 Oct 14 08:59:35
"@_DeliaMarie: It smells like ramen noodles lol" lmfao right
30 Oct 14 08:59:30
Oodles and noodles and ham RT @Tiff_Lips: What should I eat for lunch today??? I need suggestions
30 Oct 14 08:59:27
no soporto a Carlos Noodles 😤
Yilly Yaponte
30 Oct 14 08:59:27
When Cassidy puts too much Siracha on his ramen noodles http://t.co/2MiETzOlYC
Joe Somerville
30 Oct 14 08:59:22
RT @Perfect_Cars_: Lamborghini Veneno http://t.co/dcYow9taHD
30 Oct 14 08:59:20
Ramen noodles are best friends
30 Oct 14 08:59:02
Hot sauce on in my cup of noodles 😍
Rachel Flear
30 Oct 14 08:58:58
last night @myahollek broke her phone by spilling vodka on it and then dropped her charger in mr noodles #life
30 Oct 14 08:58:53
One bowl of noodles + carrot cake + 10 sticks of satay and I still lost weight what the hell
Michelle Ewart
30 Oct 14 08:58:53
RT @TravlandLeisure: A hamburger bun made out of ramen noodles? Here are the strangest sandwiches to try: http://t.co/240AhPEBcD http://t.c…
IG: deliaamarie_
30 Oct 14 08:58:45
It smells like ramen noodles lol
30 Oct 14 08:58:20
I made some fried noodles :) yummy #friednoodles #gebrateneNudeln #chicken #yummy #lunch #cook… http://t.co/9Hd23Y3p5x
30 Oct 14 08:58:14
this girl in this class is eating uncooked noodles. she is so disgusting
Brandi N. Stephens
30 Oct 14 08:58:09
Vietnamese Garlic Noodles #madewithlove http://t.co/l8sxQq7aYY
30 Oct 14 08:57:48
@vi_mfc @NomNom_Noodles In one photo I had to double check the person slippers, if you know what I mean. Lol
Tucker #77
30 Oct 14 08:57:22
@aziz85_ali @aliu got mama noodles?
30 Oct 14 08:57:15
You know you eat noodles to much when you think of new ways to make it
Heather King
30 Oct 14 08:57:10
@thechrismcclure in cups of noodles
calum hoods wifie
30 Oct 14 08:56:55
BBQ super noodles are the best noodles that i have ever tasted #BBQNOODLES
Don Owens
30 Oct 14 08:56:50
@LilLayLay__ foreal though lol noodles for everybody😂
forever 0/4 + 0/5
30 Oct 14 08:56:48
RT @stylinscrexms: Fanfic Harry Styles: *almost kills people with one punch* real life harry: *misses solo during concert bc he's eating…
30 Oct 14 08:56:39
Sweet and sour pot noodles😍
30 Oct 14 08:56:11
@gaara2link Do you like Ramen Noodles? Cuz I'll be Rammin' my noodle in you later.
alex fern
30 Oct 14 08:56:10
@BigDaddyNaser bring me noodles if you're a real one
Igor Charles
30 Oct 14 08:56:07
Homemade Noodles giving it a go http://t.co/Kxlni06c6u ** #pasta #noodles #homemade #recipes ** http://t.co/SUAhaebb4E
dylan george
30 Oct 14 08:56:04
@CPInsiders @think_noodles why
Blessing Madukwe
30 Oct 14 08:55:57
Wow! I'm dope like that with Soups @gagachenille: I can make noodles to snatch your man...
East Sides Mario's
30 Oct 14 08:55:57
Our New Menu is Here! And back by popular demand is KUNG PAO! Lo Mein noodles jump fried with 9 fresh veggies... http://t.co/CSXMn9VUyu
30 Oct 14 08:55:52
"Thank you for calling noodles and company" has been so engraved into my brain that I've answered the office phone that way 😅😭
Robert McVey
30 Oct 14 08:55:51
Colorado bound! But first, stop at noodles. #whitegirl
30 Oct 14 08:55:45
@prandall_12 im eating meatballs and noodles from the freezer 😝😝😝
The Gambling Mouse
30 Oct 14 08:55:44
@willsaxo95 @FootyAccums spend it on pot noodles you work shy cunt. 😉
Katelyn Luce
30 Oct 14 08:55:38
RT @bonappetit: Psst—sometimes we love rice noodles more than pasta. We just felt you should know http://t.co/REJrRjCGqK http://t.co/nJ56lU…
Mrs. Roman✨
30 Oct 14 08:55:38
Shoutout to those noodles from last night🙌
30 Oct 14 08:55:37
Japanese Soba Noodles 蔦[ラーメン] Yahoo!ロコ 話題度:89 集計期間:2014/10/23〜2014/10/29 http://t.co/a66mjZKbem
30 Oct 14 08:55:25
RT @KamranHooman: Great Mongolian food 😛👌#mongolianfood #noodles #yum #spicy #family #food #goodtimes #music… http://t.co/HiXGX8vEcy
Kerry Dunfee
30 Oct 14 08:55:01
I just checked in at Noodles & Company with #mPLACES
/ / Brian / /
30 Oct 14 08:55:00
Just casually eating noodles in this restaurant, now I'm surrounded by chinese people. Ni hao.
30 Oct 14 08:54:55
RT @vamajagosan: 今年もニーハイで 脚の太さごまかすの!? 意外と隠せないその方法より 簡単にできる脚やせ方法がでたよ♡ これ→http://t.co/CvTZoQD6Yu むくみも解消されるって♪♪ これでショーパンも ミニスカも怖くない! http:…
30 Oct 14 08:54:54
ラーラ、ラーラ、ラララーラ Paul McCartney And Wings - Mary Had a Little Lamb http://t.co/tgIyCvyH8X
By  +Follow June 27, 2013 11:53AM



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