Krispy Kreme Doughnuts
Year-to-date gains: 109%
I’ve been following Krispy Kreme Doughnuts (KKD) with interest ever since its sizzling run caught my eye around a month ago. At that point, the stock’s 52-week gains were north of 250% — a reality that made the stock a delicious investment in hindsight, but a questionable one going forward.
The stock’s run came thanks to expansion — both of its product line and into new emerging markets like China and South Korea. The combination of both pushes have helped earnings climb at an impressively rapid pace — a 43% gain in Q1 and a 17% climb in Q2, each on double-digit sales gains.
Unfortunately, that 17% improvement — reported in late August — fell short of expectations, and the stock took a double-digit one-day tumble as a result.
That’s good news for investors interested in KKD’s growth now, though, as the much-needed cool-off Wendy’s will likely suffer soon has already taken place for this dessert darling.
Now, KKD is trading for 26 times forward earnings — about fairly valued considering blistering 25% annualized growth is on tap for the next half-decade, including a 34% earnings improvement this year alone. Rival Dunkin Donuts (DNKN), for comparison, is trading for a comparable multiple despite the fact that its earnings growth is only expected to be 16% over the same time period.
Even though the stock’s already doubled year-to-date, don’t be surprised if it keeps climbing.
As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.