Noodles fixes its sales, and its stock takes off

Earlier this year, one wondered how long Noodles & Company would remain listed, or even a public company.

The fast-casual noodle chain was closing stores. It was considering a sale. Activist investors pushed the brand toward refranchising. Oh, and it had to engineer a 1-for-8 reverse stock split just to maintain standards set by the Nasdaq Stock Exchange. Its stock price was trading for literal pennies. The split didn’t even get it to $4 a share.

That’s nothing some decent sales can’t fix. Noodles & Company’s same-store sales have risen six straight quarters, including a convincing 9.1% growth in the first quarter. And its stock, even after adjusting for the split, has taken off.

Noodles stock to date is up more than 143%. All that increase has come after the company’s first-quarter earnings report.

That performance is leading what has been a strange year for stocks so far. Investors have spent much of the year betting on comebacks and downfalls. Brands besting expectations, even by the most modest of amounts, are being rewarded. And the opposite is happening for those that disappoint.

Overall, the median restaurant stock is up just more than 2% through the end of trading on Monday, well below the 10% growth for the S&P 500 index so far. Wall Street, in other words, remains rightly skeptical of a restaurant business struggling to find its footing in the current economy.

Noodles has embarked on a revitalization strategy that has helped lift sales. But let’s not get ahead of ourselves here. While its stock has more than doubled this year, it is still down nearly 95% all time, with a market cap below $82 million. It’s far easier for a stock to take off when it is trading for pennies.

But other companies have also won over investors this year. Cracker Barrel, which was all but left for dead a year ago over, of all things, a logo, is up more than 71% so far this year because it is besting expectations. Cava has also regained its hot concept status on Wall Street, up 52%.

And El Pollo Loco, whose CEO Liz Williams has helped unlock the potential of one of the industry’s more interesting chains, is up nearly 49%.

We’ll also point out that Sweetgreen is up more than 31%, recovering some of the valuation it lost when its stock fell nearly 79% last year.

On the other hand, Wall Street has punished companies for weaker-than-expected performance or just weak results, period.

Jack in the Box, which is facing leadership and sales questions, is down nearly 32%, the worst performance of the year so far. Wingstop, whose sales have fallen for each of the past four quarters, also appears to be losing favor among investors.

But some of the brands that lost a lot of value are generating positive sales or gaining market share.

Domino’s, for instance, has lost more than 24% of its stock value so far this year, after largely holding steady last year. Its same-store sales in the first quarter disappointed, but it remains the best performing pizza chain in the world right now. Yet it faces major questions about the future of the delivery business, which has soured investor sentiment.

And then there is Shake Shack, whose stock is down 28% so far this year, thanks to two instances of lowered company guidance over a one-month period. Apparently, Wall Street doesn’t much like lowered guidance, especially when it happens twice.