UPDATE: Morgan Stanley Initiates Noodles & Co. at Equal-Weight on Valuation

In a report published Tuesday, Morgan Stanley analyst John Glass initiated coverage on Noodles & Co. NDLS with an Equal-Weight rating.

In the report, Morgan Stanley noted, “Noodles is an attractive, early stage growth company with strong unit economics and a unique value proposition for consumers, but scarcity has chased valuation beyond where we think fundamentals offer much upside. We see a balanced Risk/Reward and initiate with an EW rating...Early stage fast casual growth company in unique ‘category of one' (no direct competitors of scale). First fast casual IPO since CMG creates scarcity value. Rapid unit growth. From its current ~350 store base, we see the opportunity to expand to 2,500 units nationally. Unit growth rate of 12-14% over next few years among fastest in retail. Strong unit economics, led by naturally low food costs and modest build out costs, produce 30%+ cash-on-cash returns.”

Noodles & Co. closed on Monday at $42.12.