The stock of coffeehouse and coffee brand retailer Caribou Coffee Company (Nasdaq:CBOU) was on a tear earlier this year, but it has cooled considerably so far in May. Slowing trends from a key customer and negative overall stock market sentiment have pushed the share price into more reasonable territory.
Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Recent Developments

Earlier in May, Caribou reported first quarter results. Sales advanced a very healthy 11.4% to $80.5 million. Coffeehouse store sales accounted for the vast majority of the top line at 74.2% and advanced a modest 3.7% on new store openings and comparable same store sales that increased 2.5%. Commercial and franchise sales made up the rest of sales and jumped almost 42%.

More recently, Caribou presented at the Baird Growth Stock Conference and provided its long-term growth goals. Management expects to continue to ramp up new store openings and eventually reach 8 to 10% new unit growth annually. At the existing stores, it projects comps between 2 and 4% and growth in its commercial segment between 15 and 20%. Combined with cost controls, it expects to leverage this into annual earnings growth of around 25%.

Outlook and Valuation
For the full year, analysts currently project 7% sales growth, total sales of almost $350 million, and 49 cents in profits per share. This fits right in with Caribou's guidance for sales growth between 6 and 8% and diluted earnings in a range of 47 cents to 50 cents per share. In 2013 they project robust profit growth of nearly 27% to earnings per share of 62 cents on 10% sales growth to $384.2 million.

Based on these projections, the forward earnings multiples stand at 23.2 and 18.3, respectively.

SEE: Everything Investors Need To Know About Earnings

The Bottom Line
Current negative investment sentiment in the stock market has pushed Caribou's stock 40% below its highs for the year. Investors were also concerned about slowing trends at Green Mountain Coffee Roasters (Nasdaq:GMCR), which owns the popular Keurig "K-Cup" single-serving cup devices. Caribou's commercial growth is tied to Keurig.

This should still be a growing category. Caribou points out that 85% of coffee is still brewed at home and moving to more premium blends. Overall, there should be plenty of room for Caribou to sell its brands to Green Mountain, and potentially to other rivals such as Kraft's (NYSE:KFT) Tassimo machines and Sara Lee's (NYSE:SLE) Sensio devices. It can also continue to grow its smaller store base, such as peer Peet's Coffee & Tea (Nasdaq:PEET). The earnings valuation still isn't in the bargain basement, but is much more reasonable that just about a month ago.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

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

Related Articles
  1. Investing

    Build a Retirement Portfolio for a Different World

    When it comes to retirement rules of thumb, the financial industry is experiencing new guidelines and the new rules for navigating retirement.
  2. Options & Futures

    Use Options to Hedge Against Iron Ore Downslide

    Using iron ore options is a way to take advantage of a current downslide in iron ore prices, whether for producers or traders.
  3. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  4. Markets

    Why Gluten Free Is Now Big Business

    Is it essential to preserving your health, or just another diet fad? Either way, gluten-free foods have become big business.
  5. Professionals

    Chinese Slowdown Affects Iron Ore Market

    The Chinese economy's ongoing slowdown is having a major impact on iron ore demand.
  6. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  7. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  8. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!