I still just do not "get" why all of the people "down" on Krispy Kreme act like $1.1 billion is some insanely high number.
If anything, it is most probably a low number.
Its a high number when considered in light of Krispy Kreme's earnings unless you expect the companies profits to rise over 100% YoY. Sequentially the companies last quarter was below that of the quarter before. Comparing last quarter with a year ago you get 36% growth. This is healthy growth but not enough IMO to reasonably support an 100+ P/E.
Compareing KREM to AMD (I know a completely different industry but its a company I know a fair amount about).
KREM - Price: 89.06 Market Cap: $1.15bil Last 2Q revenue: $71mil, $70mil. (slight sequential decline) Profit Margin: 3.79% EPS estimates: Q3:$0.23 Q4:$0.23 Full Year:$1.00 Trailing P/E:106.68 Est. Future P/E at today's stock price and FY earnings estimates:89.06
AMD - Price: 24.50 Market Cap: $7.63bil Last 2Q revenue: $1092mil, $1170mil. Profit Margin: 9.08% (on trailing data, this is rapidly improving), EPS estimates: Q3:$0.62 Q4:$0.74 Full Year:$2.56 Trailing P/E:22.6 Forward P/E:9.57.
Lets try another - AMAT (the leader in its field of semi-conductor equipment)
Price: 54.19 Market Cap: $43.95bil (yes a lot higher, but it is a much bigger company). Last 2Q revenue: $2190mil, $2732mil Profit Margin: 20.13%, EPS Estimates: Q3:$0.70 (actual), Q4:$0.76, Q1 '01:$0.81, FY2000:$2.39, FY2001:$3.55
Trailing P/E: 26.17 Forward P/E: 22.67
If you want something in food service
OSI Outback Steakhouse
Price: 27.38 Market Cap: $2.13bil Last 2Q revenue: $464mil, $481mil Profit Margin: 7.67% EPS Estimates: Q3: $0.45 Q4:$0.49 FY2000:$1.87 Trailing P/E:15.81 Forward P/E: 14.64.
or Papa John's - PZZA
Price: 24.06 Market Cap: $0.58bil Last 2Q revenue: $227mil, $231mil Profit Margin 5.49% EPS Estimates: Q3:$0.49 Q4:$0.68 FY2000:$2.12 Trailing P/E:13.89 Forward P/E: 11.34.
Wendy's which has 1,124 company operated stores, 4,497 franchised stores, and also operates 1,866 Tim Horton's restaurants. (as of 7/00 per SI) and had over $1bil in revenue in the last 6 months with net income of $86.6mil has a market cap of less then twice KREM's. KREM's revenue and income for the last half year? - $141mil and $2.9mil. KREM has 154 stores. Sure KREM is growing faster and doesn't have to battle McDonalds, but if I was sole owner of Krispy Kreme I think I would be willing to trade it for a 51% ownership of WEN.
KREM's market cap is very high for its earnings and current growth. If you think KREM is going to grow tremendously from here it could potentially turn out to be a good investment but the company has to preform perfectly for
years to support its current valuation.
One thing KREM does have that all of the other stocks I mentioned do not, momentum. IF you buy KREM as a trade it may be profitable, but the stock price now is richer then their doughnuts.
Tim |
