Please ensure Javascript is enabled for purposes of website accessibility

Why Zoe's Kitchen, Inc. Stock Plunged Today

By Steve Symington - Feb 8, 2016 at 5:05PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The fast-casual restaurant chain dove on no news.

What: Shares of Zoe's Kitchen (ZOES) plunged as much as 10.9% Friday, then partially rebounded to close down 8.6% on no company-specific news.

So what: Rather, Zoe's was hardly alone among stocks getting pulled down by the broader market yet again today. The S&P 500 index dove as much as 2.8% this afternoon, then cut its losses to close down 1.4%. 

And this despite the fact Zoe's has posted impressive results of late. Last quarter marked the fast-casual restaurant chain's 23rd consecutive period of achieving positive growth in comparable-store sales. And an encouraging presentation at this year's ICR Conference in Orlando helped Zoe's stock stage a 15% rally in short order last month. Fueled by both new locations and a 4.5% increase in comps in Q3, Zoe's managed to grow third-quarter revenue a solid 29.4% year over year to $56.4 million. 

Now what: But Zoe's also sits just barely on the cusp of sustained profitability -- analysts, on average, expect it to post profits of just $0.13 per share in the coming year -- which makes it look terribly expensive at first glance with a forward P/E ratio of 194.3. But keep in mind the company is still investing heavily to achieve top-line growth and maintains a goal of roughly doubling its store base (which last quarter stood at 165 locations) within the next four years. Eventually as that base grows and the company is better able to leverage its operating model to generate meaningful bottom-line profits, the stock price should reflect as much, and today's no-news volatility should look like little more than a blip in the radar.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zoe's Kitchen, Inc. Stock Quote
Zoe's Kitchen, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.