Panera Bread, Noodles, or Chipotle?

Recently, Noodles & Co.  (NASDAQ: NDLS  ) went public, adding to the options investors have to choose from in the fast-casual restaurant trend. Previously, the main stocks in the category to pick from were just Chipotle Mexican Grill (NYSE: CMG  ) and Panera Bread (NASDAQ: PNRA  ) . With a third stock in the mix, choosing is getting tougher.

Let's take a look at each company.

Panera Bread
After reporting worse-than-expected second-quarter results, Panera Bread's stock fell 10%. The big miss was on the all-important comparable-store sales metric. Sales at company-owned net bakery-cafes open more than one year were up just 3.8% in the quarter, certainly a disappointing number for a stock priced at 27 times earnings.

Even worse, when you zoom out and take a look at the company's overall comp trend, it's definitely not looking too hot:


Source: Data retrieved from quarterly SEC filings for respective quarters shown.

But as I recently explained, this is more likely due to the secular trend of increasing frugality across restaurants as a whole in the U.S. than it is due to Panera Bread's execution of strategy or the health of its stores.

Unsurprisingly, worse-than-expected comps weighed on revenue, too, with revenue growth slowing to 11%. 

But this bakery's growth story certainly isn't over. Management insisted that it will either be at or above the high end of its guidance for 115 to 125 net new bakery stores for fiscal 2013. That's about a 13.2% increase to the company's total store count in just one year -- not bad.

Chipotle Mexican Grill
Chipotle is definitely growing faster than Panera Bread, but investors must be willing to fork out a larger premium to buy into the stock's growth story.

In the company's most recent quarter, revenue was up a nice 18.2% from the year-ago quarter. Comps were up 4.5% after an adjustment for a shorter quarter.

Its growth story really starts to take shape when you look at its restaurant openings. In the first half of the year, the company increased its store count by 15.3%.

And Chipotle has a smaller footprint than Panera Bread, likely giving it more room to run in the future. Chipotle's total restaurant count is 1,502, 200 fewer than Panera Bread's bakeries.

Noodles & Co.
Yet another Colorado-founded fast-casual concept, Noodles & Co.'s IPO created a lot of hype. Investors were wondering, is Noodles the next Chipotle? Why not? The company's CEO is none other than Chipotle's former chief operating officer, Kevin Reddy.

Noodles, however, is a very different concept than Chipotle. Sure, it's a surefire example of a fast-casual concept, but it has a much broader menu and slower service.

What Noodles does have going for it, however, is growth opportunity. At 327 restaurants, the company definitely has quite a bit of room to grow. In plane site for every investor to see, the company's S-1 filing laid out a convincing reason to bet on the company:

From 2004 to 2012, we increased the number of our total restaurants from 100 to 327, representing a CAGR of 16%. If we continue to grow at our current rate, we believe we have the opportunity to grow to 2,500 restaurants across the United States over the next 15-20 years, although this growth rate is not guaranteed.

But to get in on this growth opportunity, it definitely isn't cheap -- but it's not super expensive, either. The company trades at about 4.4 times sales, on par with Chipotle but more expensive than Panera Bread at 2.2 times sales.

Which company makes the best investment?
I'm bullish on the overall fast-casual trend, but I'd prefer to place my bet on the best investment of the three. While each company has its pros and cons, it's this chart that helps me make my choice.


Source: Data retrieved from Yahoo! Finance.

The fast-casual segment is still fresh and growing fast. As a young and fast-growing company that's already established itself with 327 stores to prove its concept works, I think Noodles & Co. has a long and rosy road of growth ahead of it while it catches up to its peers. Backed by an experienced and talented CEO, I'm betting on Noodles & Co.

Though Noodle's & Co certainly has plenty of growth ahead, it's not even growing close as fast as this company. Watch our jaw-dropping investor alert video today to find out why The Motley Fool's chief technology officer is putting $117,238 of his own money on the table, and why he's so confident this will be a huge winner in 2013 and beyond. Just click here to watch!


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