It has now been a year since Noodles & Company (NASDAQ:NDLS) made its debut on the market. Over the past 12 months, the fast casual restaurant concept that is known for its diverse selection of noodles and pasta dishes has drifted down over 4%.

By comparison, Potbelly (NASDAQ:PBPB), which made its debut later in October of 2013, has seen its market value cut by nearly half.

Both fast casual chains were often compared to Chipotle (NYSE:CMG) before going public, and still are today. However, Chipotle still appears to be in a league of its own, climbing over 60% in share price over the past year.

Before we look at Noodles & Company's performance going forward, we should see how the company has done overall since going public.

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Noodles & Company recently hit its one-year anniversary on the stock market. Source: Noodles & Company.

How recent earnings for Noodles & Company stack up against its peers
Top and bottom line numbers for Noodles & Company during their fiscal first-quarter 2014 earnings showed revenues increased 10.1% to $89.5 million, which resulted in net income jumping 56% to $1.4 million. Same-restaurant sales, however, dipped 1.6% because of lost traffic from the severe winter weather in the Northeast.

By comparison, fiscal first-quarter 2014 earnings for Potbelly rose 7.5% to $73.9 million. However, bad weather and one-time charges forced the company to report a loss of $0.3 million. Like Noodles & Company, same-restaurant sales fell 2.2%.

In contrast to both Noodles & Company and Potbelly, Chipotle continued to hit another home run it its fiscal first-quarter 2014 earnings with revenues up 24.4% to $904.2 million and net income up 8.5% to $83.1 million. Despite the bad weather, same-restaurant sales hit double-digits again at 13.4%.

Focusing back on Noodles & Company, its earnings history since the first quarter of 2012 highlights a trend that has disappointed some shareholders. Even though the chain has gradually increased its revenues each quarter, net income has remained mostly flat.

Additionally, in its last four quarterly earnings, same-restaurant sales have been +4.4%, +2.1%, +3.9%, and most recently, -1.6%. This could mean Noodles & Company hasn't caught on as quickly as many had hoped. Nevertheless, the company has several positives going for it, too.

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Net income growth has been one of the concerns for Noodles & Company in recent years. Source: SEC Filings.

Looking at Noodles & Company's positives and negatives going forward
Earlier this month, Noodles & Company opened its 400th location. This puts the company well ahead of Potbelly's 317 and is a milestone for the company regarding its long-term goals.

Management recently announced optimism for up to 2,500 locations in the U.S. over the long term. This figure seems unrealistic right now given that fast casual leader Chipotle has just 1,637 locations. However, getting to 400 is still a step in the right direction. This is especially true given that the company is entering new markets like it did with its first location in Massachusetts this past April. 

Unlike Potbelly, Noodles & Company's menu still fits in more of a niche than most realize. Whereas Potbelly has to compete with dozens of nationwide and global sandwich chains along with all of the other typical fast food restaurants that have sandwiches on their menus, there still isn't another restaurant chain quite like Noodles & Company.

Finally, many have cited Noodles & Company's menu prices as being a roadblock to the restaurant really catching on among customers looking for something quick to eat at a low price. Given that commodity prices are going up across the restaurant industry, a smaller menu price difference may make Noodles & Company more attractive for money conscious customers. Even Chipotle is raising its prices for the first time in three years later this year. 

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The long-term potential for Noodles & Company is ambitious in the U.S. Source: Noodles & Company.

Looking at its negatives, Noodles & Company still has some issues.

Diet trends may be a growing problem. According to a recent survey, almost one-third of Americans are now trying to avoid gluten, an element found in grain. On Noodles & Company's website, the company admits it has too much wheat and gluten present in the menu to eliminate cross-contamination on equipment and food prep areas. This might alienate customers down the road. The website even mentions to check with your physician before dining at the restaurant. 

Regarding its current stock price, it has not recovered since the December 2013 secondary offering for $39.50 per share. However, there is a good chance this is just a short-term sideeffect, and if the company can deliver, the share price will soon follow.

Its "Category of One" philosophy, where Noodles believes it can offer something for all taste buds, may be a long-term obstacle regarding margins and overall growth. In its latest presentation, Noodles & Company lists 51 different restaurants that its own menu covers. Potbelly and Chipotle are among the 51. 

Is being a "Category of One" the right business strategy?
Salads, soups, Asian cuisine, cafe and bakery food, burgers, Mediterranean dishes, gourmet sandwiches, Mexican, and Italian are among Noodles & Company's listed specialties. However, is this menu sustainable?

A large menu requires tremendous logistics management, and this hurts margins long term. When we consider that the company competes in the fast casual restaurant segment, where prices are usually no more than $10 for a complete meal, there isn't much room to raise prices and not lose customers to the competition.

Its large menu is further highlighted by management's response to the new catering menu. CEO Kevin Reddy stated that catering takes pressure off of the kitchen. However, should there be this much pressure on the kitchen to begin with?

Bottom line
Right now Noodles & Company looks to be in a far better position than Potbelly when it comes to revenue and net income on a quarterly basis. However, Noodles & Company has not lived up to lofty expectations of being the next Chipotle.

Even with over twice as many locations than Noodles & Company and Potbelly combined, Chipotle is still growing at a rate not matched by anyone in the segment.

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Michael Carter has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. 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 Motley Fool has a disclosure policy.

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