That's right folks, everyone's favorite fast-casual sandwich chain Potbelly Corporation (NASDAQ:PBPB), which saw its shares rocket up 120% on its first day of trading, is now valued at its original IPO price of approximately $14 per share. Needless to say, Potbelly has been on a wild ride since first selling shares to the public in October 2013 and, unfortunately, the ride has almost exclusively been downward. Poor same store sales growth, lowered analyst expectations, and shifting investor sentiment all contributed to the damage. However, all might not be lost as Potbelly had a strong showing in its first quarter back in May and seems poised to deliver again this week. So, with shares back where they started, is it possible that the Chicago-based sandwich purveyor should be of interest to Foolish investors?

What's been cooking lately?
Potbelly has a very short record as a public company so taking stock of its quarterly results since its IPO seems warranted:

Quarterly results for the period ended:

 

Dec. 29, 2013

March 30, 2014

June 29, 2014

Sep. 28, 2014

Dec. 28, 2014

March 29, 2015

Revenue

$74.8 mil.

$73.9 mil.

$83.6 mil.

$84.7 mil.

$84.8 mil.

$85.8

Net Income

($3.7 mil.)

($0.3) mil.

$2.0 mil.

$2.0 mil.

$0.7 mil.

$0.5 mil.

Store Count

307

305

312

319

334

339

Same Store Sales Growth

0.7%

(2.2%)

(1.6%)

0.5%

3.7%

5.4%

Sources: S&P Capital IQ and Corporate SEC Filings

As the company notes in its 10-K: "Our business is subject to seasonal fluctuations. Historically, customer spending patterns for our established shops are lowest in the first quarter of the year..." This is plain to see in its quarterly results. Looking ahead, here's what analysts think we can expect on August 4, 2015:

Potbelly Q2 Analyst Estimates:

Total Revenue

$95.38 mil.

YoY Growth: 14.09%

Normalized EPS

$0.10 EPS

YoY Growth: 50%

Source: S&P Capital IQ

Were Potbelly to at least meet these estimates, it would at least represent a step in the right direction. However, on its, own, it would not necessarily mean PBPB is worthy of consideration by Foolish investors. For that, we need to see how Potbelly stacks up against the competition.

Those other fast-casual options you can invest in
Fast-casual restaurants have been one of the great food-consumption trends of the last 15 years, and there's no shortage of players each with its own unique financial profile and valuation in the eyes of Mr. Market:

 

LTM Revenue

LTM Net Income

LTM Return on Equity

LTM Gross Margin

LTM Net Income Margin

Panera Bread

$2.617 bil.

$161.5 mil.

23.6%

33%

6.2%

Chipotle,

$4.441 bil.

$514.9 mil.

25.7%

38.3%

11.6%

Zoe's Kitchen

$188.5 mil.

$0.7 mil.

0.5%

20.6%

0.4%

Potbelly Corp.

$338.9 mil.

$5.2 mil.

3.4%

30.4%

1.5%

Source: S&P Capital IQ

Unfortunately direct competitors to Potbelly, like Quizno's and Subway, are private but we can get a solid feel for the fast-casual competitive landscape with these four enterprises:

 

Recent Price

Enterprise Value/Revenue LTM

Trailing Normalized P/E

Forward Normalized P/E

FY 2017 EPS Estimates

Panera Bread

$204

1.85

29.7

28.67

$8.09

Chipotle,

$743

4.6

42.0

36.1

$28.94

Zoe's Kitchen

$44

4.26

N/A

N/A

$0.21

Potbelly Corp.

$13.70

1.0

54.4

44.3

$0.46

Source: S&P Capital IQ

As the reader can no doubt see, both Chipotle (NYSE:CMG) and Panera Bread (NASDAQ:PNRA) are light years ahead of their smaller cousins Potbelly and Zoe's Kitchen (NYSE:ZOES). Unfortunately on Wall Street you often need to pay up for quality. Both Chipotle and Panera trade for pretty healthy multiples of both past and future earnings, but still have more reasonable valuations than Potbelly. Given this simple fact, and each of these chains' proven ability to execute and grow profitably, it seems that the case is closed on Potbelly. Before we call it, however, let's take a look at where Potbelly's management plans to take the company in the decade ahead.

A sandwich in the hand is worth two in the potbelly stove?
Potbelly's management team recently presented at the William Blair Growth Stock Conference on June 9, 2015. There, PBPB laid out its growth plans for the foreseeable future and the presentation, found here, is a must read for any investor thinking of taking a bite out of PBPB's shares. Key highlights included:

  • Potbelly's next growth phase is expected to generate 10% annual store count growth well into the future
  • PBPB is in the process of entering the new markets of Utah and Colorado now
  • Key future markets of Florida, the Carolina's, and California remain huge future potential markets
  • PBPB is currently on track to generate low single digit same-store-sales growth this year
  • On track to deliver EPS growth this year of at least 20% and 48-55 new store openings
  • Long term goal of 20% annualized EPS growth remains intact

These insights, coupled with Potbelly's valuation relative to its peers allows us to at least make some broad conclusions about PBPB's attractiveness as an investment – unfortunately it's not good.

Foolish final thoughts
Imagine, if you will, the opportunity to invest in one of two restaurants. One is a growth-stage chain currently valued at 44 times forward earnings that will probably generate mid-single digit same store sales growth, 10% annualized new store openings for the foreseeable future, and 20% annualized earnings growth for the next decade – IF all goes according to plan. The other option is a larger chain, 13 times larger in fact, and it continues to generate higher same store sales growth than option one, equal or better total store opening growth potential, and a slightly inferior earnings growth profile simply due to its larger size. This is the choice investors have today when evaluating Potbelly and Chipotle (or Panera Bread for that matter). Alas, for Potbelly shareholders, it seems that it still just doesn't offer enough to long term investors even at its original IPO price.

Sean O'Reilly has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill, Panera Bread, and Zoe's Kitchen. The Motley Fool owns shares of Chipotle Mexican Grill, Panera Bread, and Zoe's Kitchen. 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.