Remember when Green Mountain Coffee Roasters (GMCR) was going nowhere, sentenced to investment purgatory by hedge funder David Einhorn – the Grim Reaper of the stock market?
That was five months ago. Today, GMCR shares are pricier than they’ve been in over a year.
Shares of the Vermont-based specialty coffee company rose another 2% on Thursday to close above $58 a share for the first time since March 8, 2012. That’s more than triple where it was in early August, when the once-fast-rising stock bottomed out at $17.
Greenlight Capital hedge fund manager David Einhorn famously skewered GMCR in an hour-long PowerPoint presentation at the Value Investing Congress in October 2011. He questioned the company’s accounting practices, highlighted an SEC inquiry into those practices, and warned about the upcoming patent expirations on the company’s signature K-Cups.
The stock flatlined for the next nine months, dropping from roughly $93 in early October to $17 last July.
Now it’s back. The company weathered its K-Cup patent expirations last September, and remains the dominant player in the single-serve field. GMCR increased its earnings each of the last two quarters. Rather than take a step back with the added competition, the company is expected to grow its earnings 18% this year and another 14% in 2014.
With a forward PE of 18, the stock remains fairly reasonably priced given its growth outlook. Its run may not be over.
At the very least, the worst appears to be over for Green Mountain Coffee Roasters. The stock seems here to stay.
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