1-Star Stocks Poised to Plunge: Dunkin' Brands?
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, coffee shop operator Dunkin' Brands (NAS: DNKN) has received the dreaded one-star ranking.
With that in mind, let's take a closer look at Dunkin' Brands' business and see what CAPS investors are saying about the stock right now.
|Market Cap||$3.42 billion|
|Trailing-12-Month Revenue||$588.9 million|
|Management||CEO Nigel Travis (since 2009)|
CFO Neil Moses (since 2010)
|Trailing-12-Month Operating Margin||33.2%|
|Cash/Debt||$120.5 million / $1.87 billion|
|Competitors||McDonald's (NYS: MCD) |
Starbucks (NAS: SBUX)
Tim Hortons (NYS: THI)
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 69% of the 142 members who have rated Dunkin' believe the stock will underperform the S&P 500 going forward. These bears include Jeffrey2012 and All-Star TSIF, who is ranked in the top 0.1% of our community.
Just yesterday, Jeffrey2012 touched on Dunkin's precarious financial position:
WOW is all I can say. This company is running to the moon and yet, no one has truly sat down to wonder if this is a worrisome issue: The company is loaded to the hilt with debt. ... Right now, they are going to try to expand throughout the US from their stronghold in the east coast. But the bottom line won't see positives for who knows how long due to the huge debt overhang. ... Investors are going to definitely suffer from this short sightedness.
In fact, Dunkin' currently sports a whopping debt-to-equity of nearly 600%. That's obviously much higher than that of rivals like McDonald's (83%), Starbucks (13%), and Tim Hortons (34%).
CAPS All-Star TSIF elaborates on the bear case:
The IPO is good news for the three private equity firms who took Dunkin' Private in 2006, but they leveraged the heck out of it. ...
The two brands, Dunkin' and Baskin Robbins are doing so-so in the growth area. Baskin Robbins, the number one ice cream chain has had declining revenues. The Doughnut side saw decent growth before the reccession, took a two year hit and has started climbing again slow. Overall, the brand is about where it was before the recession. With the debt service Dunkin' Brands has been wobbling on turning a profit. ...
So while I like their coffee, like their menu, and like their growth overall through the recession, I can't get behind the stock above the $18 IPO range.
What do you think about Dunkin', or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of McDonald's, Starbucks, and Tim Hortons.The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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