Does Dunkin’ Brands Have a Bright Future?

With shares of Dunkin’ Brands (NASDAQ:DNKN) trading around $45, is DNKN an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Dunkin’ Brands owns, operates, and franchises quick service restaurants under the Dunkin’ Donuts and Baskin-Robbins brands worldwide. The company operates in four segments: Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins International, and Baskin-Robbins U.S. Its restaurants offer coffee, donuts, bagels, ice cream, frozen beverages, baked goods, and related products. The increasing popularity of the product offerings by Dunkin’ Brands is fueling excellent growth for the company.

If you’re grabbing a sandwich at Dunkin’ Donuts, the chain wants you to consider it a snack, not a full lunch.  The chain has been expanding its sandwich offerings to bring in more business during the afternoon. But Dunkin’ Brands CEO Nigel Travis said those sandwiches — which include fried chicken and grilled cheese varieties — shouldn’t be considered lunch. “We’re not moving into lunch. We’re in snacking. We never talk about lunch,” Travis said in an interview. Travis said Dunkin’ is focused on two growth areas — breakfast and snacking. The strategy is a reflection of how people are increasingly eating several smaller meals a day, rather than sticking to just breakfast, lunch and dinner.

Dunkin’, which is based in Canton, Massachusetts, isn’t the only company going after the snacking business. It’s a strategy being used by numerous fast-food chains to get people in the door between meals and help boost overall sales. Taco Bell, for example, has been featuring smaller bites positioned as snacks to attract customers during the late afternoon. McDonald’s (NYSE:MCD) snack wraps and fruit smoothies are designed to draw people throughout the day. For its part, Dunkin has historically done most of its business before 11 a.m. To attract more customers after that morning crush, it rolled out a lineup of deli-like sandwiches in 2012. The offerings are relatively compact so they can be easily eaten on the go, but most have north of 400 calories.