Krispy Kreme (KKD) fell some 24% in 2015, but has stabilized and actually rebounded by around 10% since I last wrote about the donut-shop chain in early December.
The company released a mixed bag of fiscal-third-quarter results the day after my column ran. Earnings came in a 19 cents a share, beating the consensus by two cents.
However, KKD's $128.54 million of quarterly revenue came in below the $132.8 million that analysts had expected. Still, Wall Street reacted somewhat favorably to the report, bidding KKD shares up some 6.4% in the two sessions following the release.
We'll get Krispy Kreme's fiscal-fourth-quarter results next week, but not much could surprise me in the results. Frankly, I've come to expect the unexpected during several years of owning the stock.
That said, the upcoming earnings have been a tough call in terms of consensus estimates, primarily because just four analysts cover KKD these days. Their consensus forecast calls for 21 cents in earnings per share on $133 million of revenue (which would represent a decent 6% increase from the same quarter last year).
From a valuation perspective, Krispy Kreme currently trades at about 16x 2017 consensus earnings estimates. I don't view that as expensive -- in fact, it's one of the lowest forward price-to-earnings multiples that you'll find among restaurant chains. For instance, Krispy Kreme competitor Dunkin' Brands (DNKN) currently trades at about 21x forward earnings estimates.
Personally, I view Krispy Kreme as an iconic brand that has less than a $1 billion enterprise value despite all of the progress that the company has made since it nearly imploded a decade ago.
KKD's balance sheet also remains clean, with the company ending last quarter with $37 million in cash and less than $12 million in debt. Additionally, Krispy Kreme owns the land that 30 of its stores sit on, as well as the buildings that 62 locations occupy. This real estate component is a real sweetener on the asset side.
Lastly, more than two-thirds of Krispy Kreme's locations are now overseas --somewhat surprising for a U.S. donut-shop chain that's been around since 1937. The chain's U.K. franchisee last week announced plans to go public, which could bring additional attention and awareness to KKD.