Two weeks ago we suggested, in our monthly column for Restaurant Finance Monitor, reprinted here, several low priced situations that could be at important fundamental inflection points. The result in each case could be a multiple of the current price on the upside, with much less downside risk, partly as a result of the current low price and current statistical value.
With two of the three (Red Robin and Noodles) down a bit (RRGB, in particular), and The ONE Group up a little, we provide here a quick update, all relatively positive. For your easy reference, we have provided below a link to our article from March 15th, as well as our standard “writeups” on each, which as usual include the most recent conference call transcript.
Red Robin Gourmet Burgers (RRGB) – a couple of misleading headlines have not helped the stock price, talking about apparent “insider selling”, as well as planned store closings. The insider selling was, in each case, a very modest number of shares, to pay for the tax obligation of option grants, so should not be considered a negative. The 70 stores to be closed was discussed a month ago, expected over several years, with $6M of annual losses to be eliminated, so this is nothing new and a positive step in terms of pruning their location portfolio. Management indicated on the call in late February that the improvement from Q4’24 had continued into Q1’25, and our channel checks indicate no reason to expect material weakness in the last four weeks. RRGB sells, at $4.00/share, with an Enterprise Value under 4x management’s guidance for Adjusted EBITDA in calendar ’25.
Noodles & Co (NDLS) – while the stock has drifted down $0,05 to $0.10 since 3/15, with nothing new announced other than the new menu introduction, to around $1.15/share, the new “reimagined” menu has been in place for exactly two weeks. We have personally been in Noodles stores in two markets, and “agents” have checked things out in several more. With nine entrees either completely new or upgraded just recently, the stores seem more active than before, the staff seems enthused, and the customers seem to be pleased. There have been some predictable complaints on social media, since the Stroganoff (always intended to be an LTO) is no longer generally available, and “Zoodles” (a zucchini based noodle) is no longer available. From our discussions with store crew, the Stroganoff could be back periodically on an LTO basis (to maximize impact). The Zoodles required a great deal of prep work and had very little customer demand and there are other vegan items available. Overall, there is no reason to think that the greatly improved menu will not generate sustained improvement in sales. Keep in mind that among the top executives here are previous top management from no less than Darden and Panera. While Adjusted EBITDA only ran $23.6M in calendar ’24, and NDLS sells at about 6x that number, we believe that $40-50M of Adjusted EBITDA is a realistic possibility within 24 months and NDLS , with a revitalized sales trend would likely sell at several times the current price.
The ONE Group Hospitality (STKS) – the stock has firmed up a touch over the last two weeks. There has been no fundamental news, with the exception of some insider buying. The most noteworthy item was 10,000 shares by CFO, Tyler Loy, at $2.55 per share. As our standard “write-up”, provided below, shows, STKS sells with an Enterprise Value just over 5x management’s estimate of Adjusted EBITDA in calendar ’25. If their expansion of the STK steakhouse chain, as well as their development plan for recently purchased Benihana, proceed as management expects, STKS would likely sell at several times the current price.
Roger’s Article from 3/15/25
Red Robin Gourmet Burgers (RRGB) – Corporate Description
Noodles & Co. (NDLS) – Corporate Description
The One Group Hospitality, Inc. (STKS) – Corporate Description
https://www.liptonfinancialservices.com/2025/03/the-one-group-hospitality-stks-in-process/