Tickers in this Article: CBOU, GMCR, SJM, KFT, SLE
Caribou Coffee Company (Nasdaq:CBOU) bills itself as the second largest coffee house in the United States. A recent company presentation has highlighted that the vast majority of coffee is still prepared at home, but it has goals to capture an increasing share of both the at-home and away-from-home markets. Its recent quarterly financial release highlighted that each segment continues to grow robustly. Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Third Quarter Recap
Net sales advanced an extremely healthy 16.1% to $81.4 million. Sales, at its retail coffeehouse locations, advanced a modest 3.6% to account for the vast majority of sales at 72%, and consisted of 4.1% same-store sales growth, one less company-owned store during the quarter. Franchise sales improved 30.3% to make up 3.7% of sales on the opening of 3 net new locations, while commercial sales jumped 75.5% to account for 24.3% of the total top line.

Caribou continues to experience strong trends in selling its coffee and related brands to grocery stores and single-serve platforms, including the popular Keurig coffee machines sold by Green Mountain Coffee Roasters (Nasdaq:GMCR). According to a recent company presentation, 85% of the $48 billion consumer coffee market in the U.S. is still prepared at home. Caribou continues to build out its capabilities in this space, and compete with rivals that include JM Smucker's (NYSE:SJM) Folgers brand, rival single-serve platforms such as Sara Lee's (NYSE:SLE) Sensio machines and Kraft Food (NYSE:KFT)'s Tassimo devices.

Robust sales trends and cost controls helped send operating income up 52.3% to $2.8 million, or 3.4% of total sales. Coffeehouse profits fell 12.7% to $3.4 million, but was more than offset by big jumps at the smaller operating segments. A big jump in income tax expense tempered the net income improvement to 11.2% as earnings reached $1.8 million, or 9 cents per diluted share. (For additional reading, check out: Understanding The Income Statement. )

Outlook
For the full year, Caribou projects sales growth of 13% and earnings per share between 39 and 41 cents. For 2012, it expects sales growth in a range of 10 and 12%, and earnings between 48 and 51 cents per share.

The Bottom Line
Over the long term, Caribou hopes to increase annual store unit growth to between 8 and 10%, and grow its commercial segment between 15 and 20%, annually. It plans to leverage this into 25% earnings growth over the long haul. With only 559 domestic coffeehouses in 20 states, it has more than enough room to expand for many years to come.

At a current forward P/E of nearly 34, much of this growth is already priced into the share price valuation. As such, an entry price closer to $10 per share would represent a more appealing entry point, though with a couple of years of 20%, or greater, profit growth, the valuation could quickly become more reasonable. (To know more about P/E ratio, check out: How To Use The P/E Ratio And PEG To Tell A Stock's Future. )

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At the time of writing Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

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