Why Shares of Potbelly Corporation Are Surging Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

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What: Shares of Potbelly were up more than 12% as of 1:30 p.m. Wednesday after the sandwich shop chain reported strong fourth-quarter earnings.

So what: Total quarterly revenue rose by 13.4% year over year, driven by the opening of 19 new shops and a 3.7% comparable-store sales increase. For the full year, revenue rose 9.2%, 46 new shops opened, and comparable-store sales rose by 0.1%. Analysts had expected slightly lower revenue.

Potbelly for the fourth quarter posted $0.7 million in generally accepted accounting principles net income, compared to a loss of $3.7 million during the fourth quarter of 2013. Non-GAAP earnings per share came in at $0.06, $0.03 higher than analysts expected.

Now what: The company said it would open 48 to 55 new shops during 2015, growing from a base of slightly over 300 existing locations. Potbelly guided for low single-digit comparable-store sales growth, along with continued double-digit revenue growth.

Potbelly stock has tumbled since the company's IPO in late 2013. After reaching a high of about $32 per share, the stock now trades at just half that value. Shares of Potbelly now go for about 1.4 times sales, significantly lower than similarly sized restaurant chains.

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While fast-growing restaurant concepts always carry the risk of petering out early, Potbelly is one of the more reasonably priced options, deserving a deeper look from investors.

The article Why Shares of Potbelly Corporation Are Surging Today originally appeared on Fool.com.

Timothy Green 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.