Cramer: Massive Gains in Only Days?
The Street often rewards growth. But this is ridiculous, isn't it?
After all, how often do you see price action like this!
"On Friday, Noodles & Company IPO'd around $18," Cramer explained. "But the moment the darned thing opened for trading, it shot through the roof, instantly doubling to $32. That means if you got a piece of this Noodles IPO, you had a 100% gain in the space of a heartbeat," Cramer explained.
And despite those sharp gains, the stock again traded higher on Monday.
Is the stock really that fantastic? Cramer was determined to find out.
"Noodles & Company is a fast-casual restaurant chain that specializes in all things noodles," Cramer explained. The company has some 343 locations across 26 states and Washington DC, a small company that's going from regional to national."
Cramer thinks part of the gain stems from the fact that it's a fast growing restaurant chain. "And this market adores fast-growing restaurant names," he said.
However, another part of the advances involves the market's enthusiasm for the business plan and the management.
"Both Kevin Reddy the CEO, and Keith Kinsey the Chief Operating Officer, have fabulous pedigrees. Both of these guys joined Noodles in 2005 after first working at McDonald's and then moving to Chipotle in 2000, where they were instrumental in growing the fast-casual Mexican chain from a small number of locations to more than 400 across the country. In short, two of the top guys at Noodles & Co were involved in building Chipotle into a fast-food powerhouse."
And Cramer added the numbers look good too.
"The company plans to open somewhere between 44 and 50 new restaurants this year, mostly company-owned with a few franchises thrown in. In other words, Noodles is expanding its store base by 14.3% this year—roughly the same rapid pace as Chipotle back in its glory days."
And Cramer is bullish on earnings potential.
"In 2012, Noodles saw its same store sales increase by 5.4%, a very robust number, and the company has had positive comps for 28 of the last 29 quarters. "Plus, Noodles has strong margins and very attractive unit economics. You open up a new location and you get 30% plus cash on cash returns, which is great for franchisees."
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All told, Cramer thinks the sharp gains make all the sense in the world. And he thinks the stock has room to run. Of course, up 100% Cramer would never advocate establishing a new position. But nonetheless, he believes the stock warrants attention.
"I don't suggest paying up for the stock at these levels, but the next time we get a big market-wide pullback, I think Noodles could be very buyable"
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