It's been a rocky ride for Krispy Kreme (DNUT) in its second go-around as a publicly traded company. The company's post second quarter earnings rally, which saw shares hit $17 in late August, was not able to hold. Shares closed Thursday at $13.75, down 35% since the July 1st closing, when the company made its debut, and 19% off of it's $17 IPO price. That IPO price, by the way, was already significantly below the expected $21-$24 expected price range.
I've been following DNUT's re-entry into the public markets because I owned the previous version, right up until it's acquisition by JAB Holdings in 2016. I am still a bit steamed at the acquisition price. I'd acquired shares when Krispy Kreme was a forgotten name, had started to clean up its act, and was on the brink of turning around. JAB bought it for a song, $21/share or $1.35 billion.
Fast forward five years, and the current version is back in growth mode. It's also twice the size of the version that JAB acquired in terms of enterprise value, which stands at around $2.8 billion. Shares currently trade at 29x next year's consensus earnings estimates of 47 cents/share, the consensus is fairly large (11 analysts) for a company of this size. However, that consensus estimate is down five cents from the 52 cent forward consensus when I last wrote about the name on August 20th.
There was some good news recently for DNUT, namely that it was added to the Russell 2000 Index on September 20th. However, even that has not helped DNUT's cause as shares are down about 16% since that move was announced on September 17th.
I suspect that commodity cost inflation may be the biggest factor that is currently weighing on DNUT. As a growth story, it may not be seen as expensive at 29x next year's earnings, however, that estimate may be a moving target. DNUT trades at the same forward multiple (29x) it did when I wrote about in it August. The difference is that it was trading at around $15 then, and is at $13.75 now.
I still want to own this name, if the price is right. Given the uncertainty of input costs, it's still not quite right for this cheapskate.
