Well, what happened during the past Friday was definitely eye-opening to say the least.
One of my holdings, Noodles and Company, released its earnings last Thursday.
The main points of the earnings report that was released during the fourth quarter, according to Jayson Derrick at Benzinga, are that “the company earned $0.13 in the quarter, a penny short of what analysts expected. Revenue of $108.5 million also fell short of the $110.07 million analysts expected. Looking forward to 2015, the company projected an earnings per share growth of around 20 percent, well short of the 34 percent growth analysts projected. In a report published Thursday evening, Wedbush analyst Nick Setyan commented that the company's reported earnings per share was below expectations due to "continued lackluster" same-store sales growth of 1.3 percent. Setyan noted that the company's 2015 earnings per share guidance was cut to 20 percent from a prior guidance of 20 to 25 percent, but continues to be predicted on a 2.5-40 percent same-store sales growth, 19 to 19.5 percent unit-level margins and 12-14 percent unit growth. The analyst added that the comp guidance relies on a 1-1.5 percent lift from catering, a 2 percent contribution from pricing and a "meaningful acceleration" in second half 2015 trends, despite tougher comparisons.”
Basically, the company is growing, albeit definitely not at the rate that investors were hoping for. With a price to earnings ratio at the extremely high levels that they were at before the stock got cut by 30% on Friday, the company was valued at a ratio where it was simply unacceptable for them to make any mistakes whatsoever.
I also heard that same store sales growth was also lackluster compared to other similar competing stores.
All this is all the more surprising with how the stock rallied hard on Thursday. I for one thought that their earnings report was going to be on par, maybe even better than expected.
Anyway, I’m not going to lie, I’m really pissed off with what happened. However, it was definitely still a risk I took and lost. It’s not like it was unfair. Potbelly, my other holding, had an earnings beat and rallied. I guess I couldn't get them both.
I think that there’s going to be a bounce back from the huge sell off which happened. I plan on holding. I don’t really think that this drastic of a sell off was completely deserved.
I still have time to keep letting this investment roll out, and there’s no way I’m going to sell it.
Honestly, if it drops down even more, I may even purchase a larger stake. Time heals all wounds, and I still think that this restaurant has a ways to grow.
Sometimes the best thing to do is to do nothing. The earnings report was not that bad. Still holding. We’ll see if it becomes a mistake.