Krispy Kreme (KKD) has been on fire for the better part of a year and it shows no signs of stopping now.
Growth rates are fantastic, valuations are cheap and they have a great opportunity to capitalize on a revitalized product offering.
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 650 locations in 21 countries. Their droughts are also available at grocery stores.
A Blowout Quarter
Back in May the company reports a 14% increase in first-quarter revenues after the tenth consecutive quarter of rising comps. Operating cash flows are surging, tripling in the period to $5.1 million.
Net income came in at $9.2 million, more than double the same period last year. That works out to $0.13 per share, which was 4 cents better than expected. It hasn’t been a smooth ride, but Krispy Kreme has beaten estimates in 3 of the past 4 quarters.
Java Reboot
Management has been working on unveiling a new coffee platform that could give earnings a huge shot in the arm. Right now coffee is only about 4% of sales. But with solid margins and revamped offerings that should be out towards the end of summer that number could grow rapidly. There is plenty of potential growth in this untapped area.
Estimates Looking Good
The Zacks Consensus Estimate for this year is up 4 cents since the earnings release, to $0.31. Next year’s forecasts are averaging $0.40, up 2 cents. Last year Krispy Kreme made $0.12, so EPS is expected to increase 233% over the next 2 years.
Valuations
Shares of KKD are trading at 30 times forward estimates, which looks a bit lofty but with the long-term growth gives them a PEG ratio of just 0.6 times.
Hitting Highs
I have been beating the KKD drum for the better part of a year now and it was starting to look a little grim. But the last quarterly report has jolted the stock out of a down trend and pushed it to the highest level since 2007.
Read the January 28th Feature Here
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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