Why Potbelly Corp. Shares Crumbled

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.

What: Shares of Potbelly were falling apart today, losing as much as 11% after a disappointing earnings report.

So what: The newly public sandwich chain actually beat estimates on the bottom line, posting an adjusted profit of $0.06 against expectations of $0.04. But sales growth was light, improving just 1.7% to $74.8 million, missing the consensus at $76 million as comparable sales increased just 0.7%. CEO Aylwin Lewis said he was "pleased with fourth-quarter results," but noted the "external environment was disruptive." Still, the company managed to grow adjusted net income 35% in the quarter.

Now what: For the current year, management expects adjusted net income growth of 25% to 35% on low-single-digit same-store sales growth. For what's supposed to be a growth stock, that same-stores sales projection is awfully slow. Potbelly continues to expand, planning to grow its store base by about 15% in the new year, but without respectable organic growth, this brand, and consequently the stock, may not have lasting power. Shares popped after the IPO last year, but seem overvalued after today's report.

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The article Why Potbelly Corp. Shares Crumbled originally appeared on Fool.com.

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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