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Krispy Kreme Doughnuts, Inc. Message Board

  • sleeplessdad sleeplessdad Jun 18, 2000 2:38 PM Flag

    Consider this...

    Current KREM market cap: $827
    M.

    Equivalent store cost (considering 162 stores): $5.10
    Million, wow! (I know, since some of the stores are
    franchised, this figure should actually be higher)

    Per
    KK web site:
    Growth in 1998: 12.7%.
    Growth in
    1999: 9.7%.
    Growth in 2000: 14.1%.

    For 2001,
    let's say optimistically: 25%. Also, thereafter,
    optimistically (VERY) 25% year after year.

    This year
    earnings per share estimate, $0.89; next year, $1.03 (per
    Yahoo, considering 12.9M shares).

    OK, Krispy
    Kreme management finds a private buyer at these prices,
    and gets the full $827M for the company. KK puts the
    money in a CD @ 6.75% per year (available in several
    banks, and probably a conservative figure).
    "Profits"
    from the CD after one year: $55.82 Million. This is
    the equivalent of $4.32 dollars per share, for doing
    absolutely nothing but putting the proceeds from the sale in
    the bank!!

    How many years until KK earnings
    are $4.32 per share?? Probably many, many years (to
    make matters worse, consider also the future increase
    in the number of shares dur to options). Oh, and
    also if you invest the $827 Million right now, and
    reinvest the interest every year, in all likelihood the
    $4.32 per share would increase year after year. KK
    wouldn't "catch" the same potential earnings in several
    years. Sure, it is normal for the earnings per share of
    a copmpany to be below the "bank equivalent", but
    KREM is about 1/5 the bank equivalent, certainly a
    lunacy for a company growing (optimistically) at 25% per
    year.

    Longs thinking that the current prices of the stock are
    sustainable anywhere near its current value are more than
    fools. Sure, the price may not drop tomorrow, nor the
    day after tomorrow, but sooner rather than later it
    will, bigtime.

    Comments?

 
KKD
19.29+0.28(+1.47%)Dec 19 4:10 PMEST

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