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Why Potbelly Corporation Stock Fell 11% in 2015

By Jeremy Bowman - Jan 6, 2016 at 12:03PM

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The sandwich chain's struggles continue.

What: Shares of fast-casual chain Potbelly Corporation (PBPB 0.93%) got swept up in the malaise hitting the fast-casual dining sector last year, finishing 2015 down 11%, according to data from S&P Capital IQ.

As the chart below shows, it was a rocky year for the stock -- and when the closing bell came, it was down for the year.

PBPB Chart

PBPB data by YCharts

So what: Potbelly's roller-coaster ride began in February when the chain beat fourth-quarter earnings estimates, rising 17% after a strong report. The company posted a profit of $0.06 a share, twice what analysts had expected, and the company forecast 20% growth in its bottom line for the full year. Short-covering may have also driven the single-day spike as the stock quickly fell over the subsequent days. Later that month, the stock fell 7% in a single day after the company's CFO unexpectedly resigned to take a position at a different company. Investors sometimes interpret such a move as a sign of something awry, or, at the very least, a lack of insider confidence in the business.

The stock hummed along for the next few months before diving on its second-quarter earnings report on Aug. 5. Shares dropped 12% as its per-share profit of $0.08 missed estimates of $0.10. Rising food costs ate into the company's bottom-line profit as well, a concern that is facing restaurants across the board. 

Now what: Potbelly finished out the year relatively evenly, and an 11% drop is still better than some of its peers suffered as the recent onslaught on restaurant stocks prompted a sell-off this year. The stock was relatively unchanged following its third-quarter earnings report in November as same-store sales ticked up 3.7%. Looking ahead to 2016, growth will continue to be driven by new store openings. With a forward P/E of 35, the stock could come under pressure if it misses the reasonable earnings targets that analysts have set. 

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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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