Profile: Green Mountain Coffee Roasters Inc., founded in 1981 in Waterbury, Vermont, is one of today’s growing leaders in coffee beans and ground coffee sales. The company sells nearly 200 various selections of coffee, cocoa, and tea, operating under the Green Mountain Coffee, Tully’s, and Newman’s Own Organics names. The company also mastered its single-cup brewing system using the K-Cup portion packs that allow consumers to use one pack for one cup of coffee, tea, or cocoa drink.
Thesis
Green Mountain Coffee Roasters Inc. (GMCR) has been one of the greatest success stories of 2009/2010. The company has seen great success with its unique Keurig designed single serving coffee, known as K-Cup. The single serving coffee allows drinkers to brew a single cup in just a matter of seconds. The company’s two-pronged approach of selling coffee beans and grounds through distributors and selling instant-brew machines through its Keurig brand that offer single cup servings of coffee and tea right has helped the company to grow its revenue 400% in the past five years and its income by 500%.
The company’s growth has been so substantial that it is actually surpassed Folger’s and Maxwell House in sales this past year. The company’s stock as a result has taken the same path over the past five years, rising from 2.30 a share five years ago to over $31 per share – an increase of nearly 1250%. Green Mountain has definitely gotten its foot in the door and established itself as a leader in the coffee industry; however, the company has grown at phenomenal rates over the past few years. The company in Q1 of 2010 missed estimates and saw its stock plummet. The company again had problems in
September after announcing that the company would not be able to meet EPS estimates. The latest development for the company that the company was being investigated by the SEC in its first day signaled an 18% drop in value.
September after announcing that the company would not be able to meet EPS estimates. The latest development for the company that the company was being investigated by the SEC in its first day signaled an 18% drop in value. The pattern that is being established is that the stock is heavily overvalued, and any disappointment or negative news will have drastically negative effects on the stock. The great growth that the company has had has led to a P/E ratio of 61. The industry average in the Packaged Foods industry is around 16. The market tends to average between 17-19 P/E ratio. At 61, the company is carrying a lot of overvaluation, and it takes continuous positive earnings, growth,…
