Sunday kicks off the 2012 NFL season and what better way to greet it than with a bit on one of the fastest growing pizza chains: Noble Roman’s Inc. (NROM). Although its not lighting up the boards like Arian Foster and his shake-and-bake moves will, the 40 year old, award winning pizza franchise’s entry into the Take-n-Bake pizza design could be the highlight NROM stock has needed to capitalize on a growing sector. The goal posts have been widened now for the Company and their recent legal victory should spell an easy touchdown for the penny stock and their long investors like Robert P. Stiller, chairman and founder of Green Mountain Coffee Roasters Inc. (GMCR).
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NROM Stock Chart
Market Cap: 13.66M
Close: 0.70, up 0.03 (4.48%)
Volume: 112,400
Dollar Volume: $77,546
High: 0.70
Low: 0.66
Trades: 112
Average Trade Size: 7,493
Authorized: 25,000,000
Issued and Outstanding: 19,516,589
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Since the refinancing of its outstanding debt in Mid May, NROM stock has seen sporadic trading leading to almost 50%gains from 0.51 to as high as 0.75. The refinancing brought the Company’s current ratio to 2.6-to-1 as of June 30, 2012 compared to 0.8-to-1 on December 31, 2011. Subsequent filing of their most recent 10-Q again showed consistency with royalties and fees, less initial franchise fees and equipment commissions coming in at par; $1.77 million and $3.47 million for the 3 and 6 month periods ended June 30, 2012 versus $1.73 million and $3.40 million for the same periods in 2011 respectively.
Net Income for the Company that can effectively take $2 worth of ingredients, a few minutes of minimum wage labor and some equipment and sell it came in at $342,122 and $707,201 for the 3 and 6 months ended June 30, 2012 versus $388,919 and $756,933 for the same periods in 2011 respectively. The key to those top line numbers growing and radically affecting the bottom line numbers is not so much in the franchise growth, 1,710 franchises/licenses in operation on June 30, 2012 compared to 1,331 on June 30, 2011, but more so the expansion into the Take-and-Bake sector.
On July 19th, the Company agreed with an existing, independent Noble Roman’s franchisee to initiate 3 take-and-bake units in close proximity to Indianapolis’ west side which should be operational as early a Q3 2012. The Noble Roman’s Take-n-Bake concept will include some of the chain’s most popular hand-tossed style pizza, Sicilian pizza and famous breadsticks with spicy cheese sauce, all in a “take home and cook” format. Additional menu items are scheduled to be added in due course such as cheesy sticks, cookie dough, fresh salads, cinnamon rounds and bake-able pasta.
Note: As of August 9, 2012, the Company had signed 12 grocery distributors to the program.
Looking at one of the Company’s largest insiders, Robert P. Stiller, who recently sold 190,000 shares of NROM stock at .6041 leaving him with 3,479,240 shares afterwards. The sale is not as important as the number of shares he still holds, roughly 17.8% of the outstanding shares as of August 9th. Seeing his other holdings, he still holds 8,386,899 shares of Green Mountain Coffee Roasters, GMCR, after being hit with a margin call back on May 7th when he also sold his 8.06 million share stake in Krispy Kreme Doughnuts (KKD). The point being, he’s a savvy investor and these three, NROM, GMCR, and KKD are the only holdings he has had large enough stakes in to require a Form 4 filing.
Point: Being in bed with successful investors is not a bad philosophy to follow.
Looking at NROM as a penny stock to buy from a long term perspective, it’s in the same light as Soupman Inc. (SOUP). Although consistent volume trading and PPS spikes are unlikely on either, the future for both companies is bright, especially under the new food-stamp economy the U.S. has moved into. Since both have products available in grocery stores, a possible impact for sales in a cash poor economy includes the ability of food stamp users to be able to purchase their items, allowing them to capitalize on purchases which may not present themselves otherwise with certain consumers.
One final point in the short term is that Nobel Roman has been somewhat handicapped in terms of attention due to their involvement of a lawsuit involving 3 previous franchisees. After a recent court ruling in favor of the Company, they have counter-suited the parties and could see as much as $3.6 million plus attorneys’ fees, interest and other costs of collection, or a total of over $5 million. The Court ordered mediation is set for September 14, 2012.
About NROM Stock
Noble Roman’s, Inc., an Indiana corporation incorporated in 1972 with two wholly-owned subsidiaries, Pizzaco, Inc. and N.R. Realty, Inc., sells and services franchises and licenses for non-traditional foodservice operations under the trade names “Noble Roman’s Pizza”, “Noble Roman’s Take-N-Bake”, “Tuscano’s Italian Style Subs” and “Tuscano’s Grab-N-Go Subs”. The concepts’ hallmarks include high quality pizza and sub sandwiches, along with other related menu items, simple operating systems, fast service times, labor-minimizing operations, attractive food costs and overall affordability.
Since 1997, the Company has focused its efforts and resources primarily on franchising and licensing for non-traditional locations and now has awarded franchise and/or license agreements in 49 states plus Washington, D.C., Puerto Rico, the Bahamas, Italy and Canada.
Click here to view the SEC filings for NROM.
Bottom Line: There is no question about whether we like penny stocks in the food and beverage sector and NROM is another gem that we have come across. Will NROM stock become another Papa John’s (PZZA) or Domino’s Pizza (DPZ)? Taking down the top 2 pizza company’s in the world will be no easy task, but the proven success thus far of Nobel Roman’s forces long investors to keep a close eye on them.
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