Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Is Einstein Noah Restaurant Group the Perfect Stock?

Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock, then decide if Einstein Noah Restaurant Group (Nasdaq: BAGL  ) fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
  • Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let's take a closer look at Einstein Noah Restaurant Group.


What We Want to See


Pass or Fail?

Growth 5-Year Annual Revenue Growth > 15% 1.0% Fail
  1-Year Revenue Growth > 12% 1.3% Fail
Margins Gross Margin > 35% 21.5% Fail
  Net Margin > 15% 2.5% Fail
Balance Sheet Debt to Equity < 50% 91.9% Fail
  Current Ratio > 1.3 1.04 Fail
Opportunities Return on Equity > 15% 13.4% Fail
Valuation Normalized P/E < 20 19.43 Pass
Dividends Current Yield > 2% 3.5% Pass
  5-Year Dividend Growth > 10% NM NM
  Total Score   2 out of 9

Source: S&P Capital IQ. NM = not meaningful; Einstein Noah just started paying a dividend in February 2011. Total score = number of passes.

With a score of only two, Einstein Noah Restaurant Group isn't making its investors feel full. The company has one of Wall Street's most famous value investors behind it, but the business has plenty of challenges to overcome.

Einstein Noah sells bagels and sandwiches through both company-owned stores and franchises. Prior to 2001, Boston Market had a majority stake in the restaurant company, but after a bankruptcy, the company reorganized to go public in 2007 and become the largest bagel-focused restaurant chain in the country. In addition, Einstein Noah attracted the notice of value investor David Einhorn, who bought a 64% stake in the company.

But despite that vote of confidence, Einstein Noah hasn't yet delivered on its promise. Unlike Panera Bread (Nasdaq: PNRA  ) , which has better margins that have improved over time, Einstein Noah's margins are razor-thin and have deteriorated lately. And although its valuation is far cheaper than either fellow dough-sellers Panera and Dunkin' Brands (Nasdaq: DNKN  ) or other hot food-and-beverage chains such as Chipotle (NYSE: CMG  ) and Starbucks (Nasdaq: SBUX  ) , Einstein Noah simply doesn't sport the growth that those rivals enjoy.

In order to get closer to scoring a 10 than a bagel, Einstein Noah needs to boost every phase of its game. A good start would be to work on getting its debt under control, and then work to beat back higher ingredient costs to improve margins. Only by accomplishing that will Einstein Noah eventually cook up a perfect score to go with its yummy bagels.

Keep searching
No stock is a sure thing, but some stocks are a lot closer to perfect than others. By looking for the perfect stock, you'll go a long way toward improving your investing prowess and learning how to separate out the best investments from the rest.

Click here to add Einstein Noah Restaurant Group to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Finding the perfect stock is only one piece of a successful investment strategy. Get the big picture by taking a look at our "13 Steps to Investing Foolishly."

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Panera, Chipotle, and Starbucks. Motley Fool newsletter services have recommended buying shares of Chipotle, Panera Bread, and Starbucks, as well as creating a put butterfly position in Chipotle. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1587903, ~/Articles/ArticleHandler.aspx, 10/27/2016 8:50:54 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 11 hours ago Sponsored by:
DOW 18,199.33 30.06 0.00%
S&P 500 2,139.43 -3.73 0.00%
NASD 5,250.27 -33.13 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
BAGL.DL $0.00 Down +0.00 +0.00%
Einstein Noah Rest… CAPS Rating: **
CMG $368.02 Down -37.65 +0.00%
Chipotle Mexican G… CAPS Rating: ****
DNKN $47.87 Down -0.30 +0.00%
Dunkin' Brands Gro… CAPS Rating: ***
PNRA $191.11 Down -3.45 +0.00%
Panera Bread CAPS Rating: ****
SBUX $53.63 Down -0.04 +0.00%
Starbucks CAPS Rating: ****