Dunkin Brands Group Inc (DNKN), Starbucks Corporation (SBUX), Panera Bread Co (PNRA): The Market Is Underestimating This Growth Story

For instance, the company reported that adjusted EPS grew by 24% on sales growth of just 5.5%. It took Starbucks Corporation (NASDAQ:SBUX) 13% revenue growth to generate a 28% increase in EPS. By comparison, Panera Bread Co (NASDAQ:PNRA) needed an 11% increase in revenue to produce a 16% increase in EPS. As you can see, there is something to be said for the franchisees who do the heavy lifting for Dunkin’ Brands.

Management Isn’t Done
When a company retires a large chunk of its shares all at once, investors should be skeptical. Individuals have trouble timing the stock market, so why would anyone believe a company’s management would do better? Instead, what long-term investors should look for is a company consistently buying back shares.

After last year’s massive share buyback, Dunkin Brands Group Inc (NASDAQ:DNKN)’ share count is down 11.3%. If investors believed this was a one-shot deal, management is trying to erase that thought, as Dunkin’ Brands retired 400,000 shares in the last quarter alone. Granted, with over 106 million shares outstanding this only represented about 0.38% of the total. However, after the significant share repurchase last year, this just proves that management is committed to creating value for shareholders.

Some investors might have trouble with the idea of paying 28 times projected earnings for Dunkin’ Brands. However, with analysts calling for 16% EPS growth, the company’s valuation makes a little more sense. When including the company’s 1.7% yield, the value gets a little more appealing. What is really underappreciated about Dunkin’ Brands is the company’s ability to generate massive margins and significant cash flow, which can be used for further dividend increases and share repurchases.

If you want to find out more about Dunkin’ Brands, add DNKN to your personalized Watchlist today. The company’s current slogan is “America runs on Dunkin’,” and the more America runs to Dunkin’, the better this opportunity gets for investors.

The article The Market Is Underestimating This Growth Story originally appeared on Fool.com and is written by Chad Henage.

Chad Henage owns shares of Dunkin’ Brands Group (NASDAQ:DNKN) . The Motley Fool recommends Panera Bread and Starbucks. The Motley Fool owns shares of Panera Bread and Starbucks.

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