Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Noodles ( NDLS) as a weak on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Noodles as such a stock due to the following factors:

  • NDLS has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $9.0 million.
  • NDLS has traded 554,952 shares today.
  • NDLS is trading at 44.00 times the normal volume for the stock at this time of day.
  • NDLS is trading at a new low 21.15% below yesterday's close.

'Weak on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as material stock news, analyst downgrades, insider selling, selling from 'superinvestors,' or that hedge funds and traders are piling out of a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize (or avoid losses by trimming weak positions). In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on NDLS:

Noodles & Company develops and operates fast casual restaurants in the United States. It offers cooked-to-order dishes, including noodles and pasta, soups, salads, sandwiches, and appetizers. NDLS has a PE ratio of 54.6. Currently there are 3 analysts that rate Noodles a buy, no analysts rate it a sell, and 9 rate it a hold.

The average volume for Noodles has been 783,500 shares per day over the past 30 days. Noodles has a market cap of $571.9 million and is part of the services sector and leisure industry. Shares are down 23.3% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Noodles as a sell. 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 ratings report include:
  • 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%.

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