The company announced that current CFO Charles Talbot will leave his position March 27 to accept a high level position with another unnamed company. In the meantime, Talbot will help Potbelly with the external search for his replacement.
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Piper Jaffray analysts lowered their rating and price target on the company following the announcement. Analyst Nicole Miller Regan downgraded the company to "underweight" from "overweight".
Regan also lowered the company's price target to $12 from $16 due to what she said was the company's lowered credibility in the eyes of investors following Talbot's departure.
While the stock has rallied in the weeks since it hit a low of $12.39 on September 3, that's a 63.5% drop from its IPO peak of $33.90 on October 4, 2013.
The company last released its earnings results 10 days ago, reporting earnings of 6 cents per diluted share that topped analysts' estimates of 3 cents per share. The company generated revenue of $84.80 million during the quarter, topping analysts' $83.28 million expectations.
TheStreet Ratings team rates POTBELLY CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate POTBELLY CORP (PBPB) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 13.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- POTBELLY CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, POTBELLY CORP turned its bottom line around by earning $0.14 versus -$0.05 in the prior year. This year, the market expects an improvement in earnings ($0.27 versus $0.14).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 119.1% when compared to the same quarter one year prior, rising from -$3.68 million to $0.70 million.
- The gross profit margin for POTBELLY CORP is currently lower than what is desirable, coming in at 29.35%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 0.82% significantly trails the industry average.
- PBPB has underperformed the S&P 500 Index, declining 22.54% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: PBPB Ratings Report