Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Krispy Kreme Doughnuts (KKD), Starbucks Corporation (SBUX): What This Company’s Guidance Means and Why You Should Get In


The new guidance means that the company has increased its earnings guidance by at least $0.06. This translates to a solid 10.9% increase in guidance for EPS. According to Morgan’s statement, the resounding results were hugely supported by growth in the number of customers, but not price revisions. In fact, pricing contributed only 3%, which means 97% of the results were due to the company’s continuous growth in same-store sales.

Krispy Kreme’s 18-quarter streak of increasing same-store sales will play a major part in maintaining prospective earnings. This means that if same-store sales continue to grow, then there is a chance of trumping the new guidance at the end of this fiscal year. If the guidance was based on growth reported due to pricing, the potential for sustaining it, or even beating it would be over-ambitious. However, the denominator in this case (customer numbers) is quite reliable for a better performance.

Additionally, analysts’ old estimate of earnings, that is $0.55 per share, brings the company’s P/E ratio down to just 25x. If we factor in the revised guidance of about $0.60 per share, then we are looking at a forward P/E ratio of about 23.75x, not too far from the industry average of 21.68x.

This would also make the stock one of the cheapest in the industry compared to Starbucks Corporation (NASDAQ:SBUX)’s P/E of 32.25x. Additionally, the company’s PEG ratio for the next five years is also very well positioned at under 1, compared to the industry average of 1.25. Starbucks Corporation (NASDAQ:SBUX)’s PEG stands at 1.57, while Einstein Noah’s is pegged at 1.04. Dunkin’ Brands’ PEG is the highest at 1.70, with a P/E ratio of 42.64x.

The bottom line

Krispy Kreme may not be the biggest company in its industry, but it is showing grit and guts to take on the giants. Starbucks Corporation (NASDAQ:SBUX) certainly is the dominant force, while Dunkin’ Brands, despite its huge market cap, could be rated below Krispy Kreme in terms of revenue potential going forward. Einstein Noah is the underdog in this case, and poses no major threat to Krispy Kreme’s prospects.

The simple fact is that when you are experiencing growth in same store sales for 18 quarters running, that means you are doing something good. So now, let us factor that good into the company’s price and see what happens. This is the main reason why I believe that the stock is set for a continuous rally going forward. That is why you should get in before it is too late to catch the tide.

The article What This Company’s Guidance Means and Why You Should Get In originally appeared on

Nicholas Kitonyi has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Nicholas is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.