NEW YORK (TheStreet) -- Noodles & Co. (NDLS - Get Report) shares are down 20.81% to $16.40 in pre-market trading on Wednesday after analysts at Jefferies lowered the company's price target to $22 from $27 while maintaining its "buy" rating today following the casual restaurant company's first quarter earnings miss.

After the closing bell yesterday, the company reported a first quarter net loss of $2.8 million which yielded an EPS of 3 cents per share on revenue of $105.8 million. Analysts on average were expecting the company to report earnings of 5 cents per share on revenue of $110 million.

The firm also noted that the company lowered its EPS growth expectations to flat from its previous 20% growth guidance as part of the reason for its lowered price target expectations.

"NDLS stock will likely break below its $18 IPO price from 6/13 IPO and would be trading at about 9x EV/EBITDA. Although this turnaround is clearly taking longer and presenting complications, this valuation appears attractive for core/value investors looking for exposure in a restaurant group that is clearly under distribution currently. We believe 2H progress around marketing can still be a catalyst for stock, but lower our PT to $22 from $27," analysts said.

TheStreet Ratings team rates NOODLES & CO as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate NOODLES & CO (NDLS) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • NDLS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 38.95%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, NDLS is still more expensive than most of the other companies in its industry.
  • The gross profit margin for NOODLES & CO is rather low; currently it is at 20.96%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 3.25% trails that of the industry average.
  • NDLS's debt-to-equity ratio is very low at 0.20 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.27 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • When compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, NOODLES & CO's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $11.57 million or 3.59% when compared to the same quarter last year. In addition, NOODLES & CO has also vastly surpassed the industry average cash flow growth rate of -70.42%.
  • You can view the full analysis from the report here: NDLS Ratings Report
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