Dunkin’ Brands Group, Inc. (DNKN) has been a star since the IPO on July 26, 2011, with the stock up 30.26% versus the broad market being down 6.58%.
For those unfamiliar with the business, a spin off from a consortium of private equity firms that acquired the company in December 2005, DNKN, through franchising Dunkin’ Doughnuts locations, is selling doughnuts, coffee and breakfast at more than 9,900 distribution points. In addition, DNKN owns Baskin-Robbins franchise of ice cream stores, with 6,625 points of distribution. Generally speaking (as a consumer), the coffee is good, the doughnuts are, too (they are not as good as Krispy Kreme Doughnuts, Inc. (KKD), but very little is) and so far as ice cream is concerned Baskin-Robbins is ok too.
The stock, however, is vastly overpriced based upon the underlying fundamentals and is a clear short. Continue reading.