Krispy Kreme Doughnuts (KKD) is expected to more than quadruple its earnings by the end of fiscal 2012. Fortunately, the growth rates are priced at a discount and this looks like a great entry point for this Zacks #2 Rank (Buy).
Company Description
Krispy Kreme is a popular chain, selling signature doughnuts and coffee. The company has been around since the 30’s and now as more than 630 locations in 20 countries.
Another Surprise
Since I features Krispy Kreme in October Krispy Kreme, the company beat estimates once again. On Dec 1 KKD reported third-quarter revenue of just over $90 million, an 8% increase. Net income was $2.4 million, up from a loss of the same size a year ago. This is the fourth consecutive quarter of earnings growth.
Earnings per share came out to a 3 cent profit, while analysts were looking for a 1 cent loss. Identical to the previous period.
Consensus Rising
After the surprise the consensus for both fiscal 2011 and 2012 were up 3 cents, to 17 and 27 cents, respectively. Given the 6 cents earned in 2010, the growth rates are expected to be 192% and 54%, respectively.
Krispy Kreme is planning on opening at least 30 international locations and as many at 25 more in the U.S. during fiscal 2012.
G.A.R.P.
While the growth story for Krispy Kreme looks very enticing, it is just not worth it if you are paying too much. Fortunately, the PEG ratio is just 0.8 times, which is showing a pretty good discount on expected growth.
The Chart
Shares of KKD jumped on the earnings news but have retraced on rising commodity costs. But it looks like a turn around is starting and this dip makes a good entry point.
Read the October 21st Feature Here
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service
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