Potbelly IPO: It’s Hot, Hot, HOT!

PBPB shares have more than doubled in their first day of trading

   

Potbelly185 Potbelly IPO: It's Hot, Hot, HOT!The Potbelly (PBPB) IPO is here, and investors apparently were famished.

The sandwich shop chain exploded on its first day of trading, with PBPB shares up 134% as of this writing. That followed a pricing at $14 per share, which was above its expected range between $12 and $13.

That’s not just good news for the Potbelly IPO, but a sign that Wall Street remains extremely bullish on fast-casual restaurants and is willing to pay a hefty premium.

According to the S-1:

“Potbelly is a fast-growing neighborhood sandwich concept offering toasty warm sandwiches, signature salads and other fresh menu items served by engaging people in an environment that reflects the Potbelly brand. Our combination of product, people and place is how we deliver on our passion to be ‘The Best Place for Lunch.’”

Each location has a locally themed experience, which adds to the charm.

The overall strategy has worked out nicely. Chain growth, on a year-over-year basis, is 13%, putting the store count at 295. PBPB also has enjoyed positive comparable-store sales in 12 of the past 13 quarters.

What’s more, Potbelly remains efficient; from 2008 to 2012, shop-level profit margins increased from 15.5% to 20.7%.

Keep in mind that Potbelly is far from new. The company got its start back in 1977 and remained just one store until 1996, when Bryant Keil bought it. Seeing huge potential, he wasted little time in pumping up the growth.

The timing was great, as Americans were warming up to the fast-casual concept, illustrated by the huge success of companies like Chipotle (CMG) and Panera Bread (PNRA).

Overall revenue growth continues to be healthy, with the rate clocking in at about 5.6% from 2011 to 2012. And Potbelly has plenty of room to expand considering it has locations in just 18 states.

The Potbelly IPO follows in a line of strong offerings in the fast casual segment. The most recent deal to hit the markets was Noodles & Company (NDLS) in late June — an IPO that jumped 104% on its first day.

Right now, the Potbelly IPO is on track to pummel that.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/potbelly-ipo-is-hot-pbpb/.

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