Is Dunkin’ Brands Too Expensive?

February 22, 2013

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E = Equity to Debt Ratio Is Weak

This is one of the biggest negatives for the company. The debt-to-equity ratio is alarming, the balance sheet is negative, and cash flow isn’t very impressive. Operating cash flow is $154.42 million. Levered free cash flow is $141.92 million. The good news is that margins are excellent.

	Debt-To-Equity	Cash	Long-Term Debt
DNKN	5.29	$252.62 Billion	$1.85 Billion
SBUX	0.11	$2.46 Billion	$549.60 Million
MCD	0.96	$2.19 Billion	$13.26 Billion

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T = Technicals on the Stock Chart Are Strong

Dunkin’ Brands has outperformed Starbucks and McDonald’s Corp (NYSE:MCD) over the past year. As far as dividend yield, McDonald’s yields 3.30 percent, Starbucks yields 1.50 percent, and Dunkin’ Brands yields 2 percent.

	1 Month	Year-To-Date	1 Year	3 Year
DNKN	3.48%	11.46%	27.19%	1.85%
SBUX	-2.32%	-0.17%	12.18%	139.30%
MCD	2.04%	6.72%	-3.31%	59.66%

At $36.81, Dunkin’ Brands is trading above all its averages.

50-Day SMA	34.73
100-Day SMA	32.77
200-Day SMA	32.37

E = Earnings Have Been Inconsistent

Earnings have been inconsistent on an annual basis. Revenue has steadily improved over the past few years.

	2008	2009	2010	2011	2012
Revenue ($)in millions	N/A	538.07	577.14	628.20	658.18
Diluted EPS ($)	N/A	0.55	0.42	0.35	N/A

When we look at the last quarter on a year-over-year basis, we see a decline in revenue.

	12/2011	3/2012	6/2012	9/2011	12/2012
Revenue ($)in millions	168.50	152.37	172.39	171.72	161.70
Diluted EPS ($)	0.05	0.21	0.15	0.26	N/A

Let’s take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

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