Fundy, may I respectfully disagree with you on few points?
>>They need to grow their earnings at about 100% per year forever to justify their current market cap.<<
Well, if KREM's earning was to grow 100% EVERY year FOREVER, it would be selling at more like $800/shr not $80 <g>
KREM's PE is now around 95 at this inflated(?) KREM price of $80. If we only look at the current PE, yes it is way too high, but looking 5 to 10 years ahead, it seems reasonable to me.
KREM's earnings are expected to grow 25% next year. Assuming the price of KREM stays at $80, PE will drop to mid 60s.
And even with a little slower growth in year 3, I think PE will drop to 40 to 50 range.
Now take a look at SBUX with almost 7 billion mkt cap and PE of 55. SBUX investors had a 10 bagger in 7 years. I see no reason why KREM cannot follow that footstep. If I have a choice, I'd rather operate KREM store and "In & Out" hamburger shop than SBUX coffee shop.
People are lining up for KREM franchise opportunity.
Believe me, KREM will grow at faster rate in next few years.
Moreover, SBUX market is saturated. There are already 5-6 stores in our town. It seems there are SBUX shop at every corner. But KREM? There are less than 200 stores (around 160 at this point) in entire U.S. There are PLENTY of rooms to grow and I heard they are just moving into Canada. (And you know, Canadian eats more donuts per person than any other country -g-)
Oh well, I spent too much space just to counter single point. Maybe I'll get back to it later. |
