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Why Potbelly Corporation Stock Gained 17.3% in February

By Daniel B. Kline – Mar 10, 2016 at 5:59PM

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The company has shown that it can pull off adding new stores while maintaining profitability.

Potbelly Corporation (PBPB -2.15%) saw its stock jump after it reported earnings on Feb. 16, helping boost it for the month.

The company's shares closed at $10.70 on Jan. 29, rising to $12.55 on Feb. 29, when trading closed for the month, a 17.3% gain, according to data provided by S&P Global Market Intelligence. The run-up started when the sandwich shop chain released its Q4 and full-year numbers on Feb. 16.

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What: Potbelly reported that in Q4, total revenues increased 12.1% to $95.1 million from $84.8 million during the same period in 2014. In addition, company-operated comparable-store sales increased 3.7%. During the quarter, adjusted EBITDA increased 14.8% to $10.8 million from $9.4 million.

For the full year, total revenues increased 14% to $372.8 million from $327.0 million in 2014, and company-operated comparable-store sales increased 4.4%. During 2015, Potbelly also opened 53 new stores, including 43 company-operated locations and 10 franchised shops. The sandwich chain also opened its first franchise shop in the United Kingdom.

So what: Potbelly put up solid numbers during a year in which a number of quick-serve chains struggled to grow at all. Though the chain is still relatively small, it showed that it can add locations while maintaining profitability. That's a good sign for 2016, when it plans to ramp up growth even further, adding another 55-65 locations, including 45-50 that would be company-owned. 

Now what: It's all about growth as the sandwich chain heads into 2016, according to CEO Aylwin Lewis.

"The 2015 results reinforce our ability to achieve our long-term financial goals of at least 10% annual new unit growth for the foreseeable future, low single-digit comps, at least 20% annual adjusted net income growth and at least 25% return on shop investments," he said in the earnings release.

Potbelly has been on a slow and steady growth path, and there is no reason to believe it will stumble in 2016. The chain is expanding in a similar fashion to its past-year growth, so it should be able to deliver on Lewis's promises as it continues to add company-owned stores as well as franchisees.

Daniel Kline has no position in any stocks mentioned. He has never eaten at a Potbelly because he has a gluten allergy making sandwiches a challenge. The Motley Fool has no position in any of the stocks mentioned. 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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