The doughnuts taste great but the stock has given investors a tummy ache. June 7, 2004 By Paul R. La Monica, CNN/Money senior writer
NEW YORK (CNN/Money) -- Many Americans want to look more like Jessica Simpson than Homer Simpson. And that's been bad news for doughnut maker Krispy Kreme. Investors have taken a more than 45 percent bite out of the stock this year.
Calorie counters are snubbing their noses at the fattening pieces of fried dough and sugar. But Wall Street has also voiced concerns about the company's accounting and aggressive pace of new store openings. So is Krispy Kreme's stock a potentially tasty addition for your portfolio or something your investing sweet tooth should avoid? We take a look in CNN/Money's new biweekly feature, "Buy What you Know?"
Doughnuts dunked: Krispy Kreme stunned Wall Street last month when it said that sales and earnings for its fiscal year would be lower than expected due to the increased popularity of low-carb diets.
But despite the warning, Krispy Kreme is still expecting sales to increase at a healthy clip. So clearly, it's not time to sing a requiem for the doughnut just yet.
Coming down from a sugar high: It seems that the only thing more fashionable than being on Atkins is bashing the shares of Krispy Kreme. Short sellers -- investors who bet that a stock will go down -- seem to think that Krispy Kreme's prospects are staler than a week-old cruller. (Mmm...crullers)
But as a result of all this negativity, Krispy Kreme now trades at a more svelte price-to-earnings ratio than it was just a few months ago.
The glaze is still sweet: Krispy Kreme's growth outlook is still mouth-watering and it's encouraging to see that the company is scaling back on its expansion plans, which should lower costs.
Sure, momentum investors have jumped off the Krispy Kreme bandwagon. But now the stock is trading at a more reasonable price. So go ahead. Have another doughnut.
Doughnuts dunked: Krispy Kreme stunned Wall Street last month when it said that sales and earnings for its fiscal year would be lower than expected due to the increased popularity of low-carb diets.
Coming down from a sugar high: It seems that the only thing more fashionable than being on Atkins is bashing the shares of Krispy Kreme. Short sellers -- investors who bet that a stock will go down -- seem to think that Krispy Kreme's prospects are staler than a week-old cruller. (Mmm...crullers)
The glaze is still sweet: Krispy Kreme's growth outlook is still mouth-watering and it's encouraging to see that the company is scaling back on its expansion plans, which should lower costs.
