Noble Roman's NROM
March 01, 2013 - 9:29pm EST by
2013 2014
Price: 1.00 EPS $0.00 $0.00
Shares Out. (in M): 20 P/E 0.0x 0.0x
Market Cap (in $M): 20 P/FCF 0.0x 0.0x
Net Debt (in $M): 0 EBIT 0 0
TEV ($): 0 TEV/EBIT 0.0x 0.0x

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  • Franchising
  • Micro Cap

"Why so pale and wan fond lover, Prithee why so pale?" NROM's is back after a brief absence, and I hope slightly improved from the last iteration. By virture of the ratings I know that this idea has not been sorely missed, but I think the comapny and the stock are really interesting. I'll say it...I believe the stock has little risk of permanet loss of capital (solid book of .64 PLUS), and could wind up being a (@) bagger. NROM was $8 in 2006, and in many ways a better company now than then, with a promising runway in take-and-bake. Perhaps the $8 share price was irrational at the time; I honestly do not know.
Please see regarding their channel focus in TNB (to be revealed):
Besides a personally and VIC disastrous foray and posting for MCSI (Miami Computer Supply; a fraud) years and years ago (you can look it up on VIC...I was recently perturbed to learn that the disgraced CEO Peppel is not going to prison, but rather granted a hardship probation), this is the smallest market cap of anything I have ever owned. This fact makes me nervous. I ask you to kindly rely upon your own work if you deploy funds into nano-cap situations. This is a company with Google'esque margins (not the author's original observation), that does a very simple thing : Sell pizza pie. This will hopefully provide a bit more info for those with any interest, as well as some links for those inclined to look further into the industry and trends. 
Noble Roman's is a nano-cap suitable for PA's, that we think represents an interesting investment at current levels...Not screaming cheap, but interesting, and especially on any pull  back which is not uncommon in a stock this size (We think the current value is fair and does not account for any meaningful growth, growth we are betting on). Green Mountain / GMCR founder Robert Stiller still owns over 3mm shares, and has a window every 90 days to sell 190k shares which he has used serially. There are times in these 90 day periods -a new window soon- where there would appear to be little price sensitivity on the sell side, so waiting for a decline could prove worthwhile.
NROM's main source of revenue is selling frozen pizzas in the non-traditional sales channel such as convenience stores and grocers, though the biggest future driver of business is going to be similar to Papa Murphy's in the take-and-bake (henceforth : TNB; see link above on TNB) grocery category, which is the fastest growing segment of the pizza market nationally.
The company is profitable, has been around since the early 1970's, and appears to be at something of an inflection point after winding up draining litigation. The company did not do well in stand alone / full service restaurants, and in the last 12 months settled litigation in NROM's favor with some former franchisees. FWIW, the product that was shipped to our office by the CEO was very well recieved by the small sample group (5 adults, 3 kids) that tried it.
NROM has +35% operating margins, owing to the fact that it is really in the business of selling. Selling franchises and licenses to their products, and providing the product through third party producers.    
The non-traditional channel is in a slight decline, and is running at approximately $4mm per year. It is in TNB grocery sales where the growth lies, and the company has grown the sales outlets for this product from just over 80 in 2009, to approximately 1,445 to date, owing an obvious debt to Papa Murphy's success. NROM is signing approximatley 300 new stores per year, with a stated goal of just over $2,200 in sales per store / year, and a net profit of $1.16 per pizza sold. There is also a "new" TNB line of business which is in stand-alone TNB franchise sales. This stand alone business is small (2 locations running, 9 in construction / development), and located entirely in Indiana. The comapny is estimating approximately $50-$70k per stand alone franchise per year in fees and royalties.
From a balance sheet perspective, the company refinanced their debt from an effective rate of over 7% to Libor +4. Book is approximately .64 / share, but the balance sheet carries no intangibles or goodwill, and has a large NOL. As mentioned above, all lititgation with previous franchisees is over, and the company is focused on growth. Paul Mobley and his son Scott appear to work 7 days a week as evidenced by the timing of some of the conversations our analyst had with them. 
From a June 2012 shareholder meeting; GOALS:
  • $10 million revenue in 2013 with pre-tax income of approximately $6 million (30c)
  • Total revenue of $13 million in 2014 with a pre-tax income of approximately $8 million (40c)
  • Debt paid off in 24 months
  • Start paying a dividend after debt is paid off
Please see also:
Great that they think this. I believe them to be honest. However if they sniff these goals the stock is higher.
Lastly and least inmportanly. PZZI as a comp is in many ways beneficial (and a bit of a joke) compared to NROM.
What could this company do IOO? They are in the fastest growing segment of the pizza market, TNB. Our analyst thinks over $8mm (o.k. approaching $9mm) in EBITDA in four years is quite possible, and with their margins, gets to a valuation quite a bit higher than present. (A $2 NPV is the low value of outcomes.)
If this company can grow .10 / year going forward; it is a higher priced stock. 
CEO is both accessible and very helpful if you are inclined to dig further.
We are long stock, and have no relation to the company that would merit disclosure.

I do not hold a position of employment, directorship, or consultancy with the issuer.
I and/or others I advise hold a material investment in the issuer's securities.


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