The fact that the stock market values this
doughnut company at $1 billion tells you how naive
investors are. If you thought investors were stupid buying
dot.com companies a few months ago buyers of KREM aren't
far behind. Doughnuts aren't exactly a new phenomenom
like the internet. You can't even use the word
"investor" for shareholders of KREM because it doesn't even
meet the definition of an "investing". Watching with
Let's say that KREM makes $1.50/share, the stock
will then be worth about $40-$50/share based on a
fairly liberal valuation. That generous assumption
assumes that the mounting outrage in the US over more and
increasingly fatter and fatter people (who are placing ever
more expensive demands on our overburdened health-care
system) won't result in tarring KREM's products much as
tobacco has been tarred.
i don't type without thinking. yes, i am
comfortable with that statement.
$4 million off of
next year's base with growth in new stores, same store
sales, and leveraging of the fixed costs and lower
advertising as a percentage of revenues is very easy in my
now, let's move on and we shall see who is right. my
bet is that the earnings in FY2002 ending january
2002 (basically calendar 2001) will be very close to
$1.50 per share and much higher than the $1.25 that is
you are free to disagree and be wrong.
You say "ONLY" $4 million of earnings
At a 4% margin, this requires $100 million MORE in
That's Quite a bit for a doughnut shoppe
chain that had $70 million in revenues for the last
quarter (July), wouldn't you say ????
fyi, a basis point is 1/100th of a percentage
point. if you think net income margins can't go from,
say, 4% of revenues to 6% (which is a 200 basis point
improvement), then you are crazy. just leveraging their fixed
costs over a larger store base will do that.
extra 25 cents of EPS i am getting for next year is
only $4 million extra -- not hard to get there in my
to each his own. the shorts are wrong and will
continue to be IMO in the SHORT TERM.
Yes, I agree that there can
be earnings surprises due to the factors you
What I'm saying is that these factors were taken into
account when the analysts created
models. Maybe KREM beat the consensus last Qtr due to
unusually low sugar
& butter prices ? It's hard to model
the impact of changing commodity prices on
To say that EPS growth will be DOUBLE the consensus
is possible. But a long shot.
that KREM is messing with the books. They took a $9
million charge in 1999
to create reserves. Look at the
filing to confirm this.
These reserves can be
relieved when KREM needs a little extra $ to meet
estimates. This just
can't go on for long.
assumption that margins might increase "A Few Hundred Basis
Points" is nothing short of ** ABSURD **
agree with you 100%, but the timing of KREM's
downfall might be much further off than anyone can
remember the trick to shorting stocks is to find the
inflection point where wall street realizes the economics of
a business are SLOWING DOWN.
wall street is
about to be shown an incredible ACCELERATION of the
economics of KREM, which will seem to justify the high PE
in the short run, IMO.
i have no position,
because my academic head says short, but my pragmatic
street mind says i am WAY TOO EARLY.
The problem with beating estimates in a massive
way year after year is that it is one thing to go
from 60 cents to 1.20 (100%), it is something else
altogether to go from 1.20 to 2.40 the next year. Clearly
they loaded up last year with a lot of expenses, and
are deferring things this year. At some point it
catches up to you.
I shorted this stock along time ago and have
watched it grow and watched my account shrink -it has
sucked ---bad !
But today my faith is restored
not only once but twice with the two downgrades - To
those of us who have been waiting for this to happen
just a couple of words - YOU WERE RIGHT!!!!!!!