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Noodles & Company’s (NASDAQ:NDLS) Path To Profitability

Noodles & Company’s (NASDAQ:NDLS): Noodles & Company develops and operates fast casual restaurants in the United States. The US$565.0m market-cap posted a loss in its most recent financial year of -US$45.4m and a latest trailing-twelve-month loss of -US$18.3m shrinking the gap between loss and breakeven. Many investors are wondering the rate at which NDLS will turn a profit, with the big question being “when will the company breakeven?” Below I will provide a high-level summary of the industry analysts’ expectations for NDLS.

View our latest analysis for Noodles

According to the industry analysts covering NDLS, breakeven is near. They expect the company to post a final loss in 2018, before turning a profit of US$4.7m in 2019. Therefore, NDLS is expected to breakeven roughly a few months from now. What rate will NDLS have to grow year-on-year in order to breakeven on this date? Using a line of best fit, I calculated an average annual growth rate of 60.8%, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.

NasdaqGS:NDLS Past Future Earnings September 18th 18
NasdaqGS:NDLS Past Future Earnings September 18th 18

I’m not going to go through company-specific developments for NDLS given that this is a high-level summary, however, keep in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before I wrap up, there’s one issue worth mentioning. NDLS currently has a debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn’t exceed 40% of your equity, which in NDLS’s case, it has significantly overshot. A higher level of debt requires more stringent capital management which increases the risk in investing in the loss-making company.

Next Steps:

There are too many aspects of NDLS to cover in one brief article, but the key fundamentals for the company can all be found in one place – NDLS’s company page on Simply Wall St. I’ve also put together a list of essential factors you should further examine:

  1. Valuation: What is NDLS worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether NDLS is currently mispriced by the market.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Noodles’s board and the CEO’s back ground.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

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