This is one, as a passionate home cook and investment analyst, near and dear to the heart. But a cigarette butt at the moment. Tough turnaround story.
NDLS has been on the eye for many moons. It first came to my attention in the public markets circa 2015 and was trading in the $20-30 range. I never checked on the financials back then – only the food. And the noodles were good, even though the menu was a little crowded with sandwiches and some other non-noodle items. But the pad thai and the Japanese pan noodles and the breaded chicken cutlets with the pesto cavatappi – delicious.
Noodles was founded in 1995 in Colorado by Aaron Kennedy. Its headquarters today reside in Broomfield, CO, and as of December 31, 2024, the company manages 463 restaurants in 31 states, including 371 owned by the company and 92 franchised. It formally IPOd at $11 in October 2014 and was a hot issue, doubling from the get, but since then it has fizzled, dropping to $0.73 as of October 21, 2025. Two hedge funds, Mill Road Capital Management and Nantahala Capital Management, own approximately 25% of the company between the two of them, and both are known for seeking firms mispriced by the public markets. This is right in the cigarette butt value investment wheelhouse. But without a ton of cash on the books and without quality long-term assets, it is not a worthy investment at this time.
As a long-time patron of NDLS, I’ve always loved the actual food itself. Its combinations of flavors definitely hit, and general quality is reasonable. I wish they would give you more abundant portions, but shareholders would not necessarily like that high-cost, low-margin protein going all into digestive tracts. NDLS delivers solid noodles and has simplified the menu to focus on that core, doing away with those sandwiches. This is a good thing, as the company has recently explored making a sale at its abysmal capital structure: its assets include $137m of Net PPE and $157m of leased properties, for total assets of $324m, compared to $330m of total liabilities. This on a market capitalization of $32m as of November 28, 2025; declining revenue due to streamlining the business, and $25-50m of annual capital expenditures. The saving grace here is management has figured out how to generate $20-30m of EBITDA annually in the past three years.
The locations themselves are in excellent, high-traffic areas. This of course necessitates quality of product and service to keep the consumer from spending money elsewhere. And unfortunately, recent testimonials and scuttlebutt have indicated that the employees really do not have much interest in franchises. It really could be a good stepping stone to a better restaurant job, given sauté stations and sauces. Noodles are traditionally a peasant food and can be very flexible for the consumer, with a broad variety from the noodles themselves to the veggies, proteins, and sauces. The chef can learn a great deal about cooking from the humble noodle dish. And so, if Noodles continues to narrow its focus, its employee base of 7000 or so will improve its quality over the long run.
The company closed seven restaurants in 2024, and is targeting further closure of another 32 in 2025. This may optimize out the non-profitable restaurants, but the more important issue is that the company is trending back toward quality and focus: this will, along with the trimming of the sandwiches, reduce the total number of restaurants management needs to address by 8%, not to mention responding to diner trends where over 50% of its orders came in digitally. Along with the shuttering of the sandwich lines, management is narrowing its focus.
Lots of positive things need to hit for Noodles to return to its former glory. When Mill Road announced its position in early 2025, the stock had a nice runup, but has since returned to its lowly sub-$1 trading range.
Inverness has had interest in NDLS in the past, does not currently, and will not enter into a position until the liabilities situation has improved.