Dunkin Brands Group Inc (DNKN): Time to Count the Donuts

For that matter, even the 150 restaurants that Dunkin Brands Group Inc (NASDAQ:DNKN)’ recently said it plans to open in the United Kingdom over the course of five years works out to about 0.17% store growth each of those years. Yet that news somehow sparked a 2% rise in Dunkin’ stock last Thursday.

Foolish takeaway
Growth initiatives like what we saw this week in Texas, and last week in the U.K., are necessary for Dunkin Brands Group Inc (NASDAQ:DNKN), no doubt. But in the broader context of a 17,700-outlet coffee ‘n’ doughnuts ‘n’ ice cream shop, they’re still pretty small potatoes. They don’t justify the rise we’ve seen them inspire in Dunkin’ shares. Nor do they justify investors paying 39 times earnings for a stock growing at just 16%.

Meanwhile, archrival Starbucks Corporation (NASDAQ:SBUX) boasts a lower valuation than Dunkin Brands Group Inc (NASDAQ:DNKN)’ (36 times earnings) and a larger store count (19,200-plus stores) yet somehow continues to grow faster than Dunkin’ (with better than 31% trailing annualized profits growth, and nearly 20% annual growth projected). While I’m far from convinced that even Starbucks shares are cheap enough to buy, I know one thing for sure: By comparison, Dunkin’ shares are even more overpriced.

The article Everything’s Bigger in Texas — Dunkin’ Donuts Included originally appeared on Fool.com.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Starbucks.

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