Numerous positive signs for Dunkin Brands Group
Most investors are probably familiar with the quick-service restaurant Dunkin Donuts, but there is more to the company than just donuts and coffee. Sure Dunkin Brands Group (Nasdaq: DNKN) operates 12,900 Dunkin Donuts locations, but it also has 8,000 Baskin-Robbins locations.
The stock has been performing well over the last few years and there are a number of positive signs that it could continue to perform well.
Looking at the fundamental statistics, the company has seen earnings grow by 14% per year over the last three years while sales have increased by 19% per year during the same timeframe. Earnings increased by 8% in the third quarter while sales were up 2%. In addition, the profit margin is above average at 23.6%.
The statistics above help give the company an SMR rating from Tickeron of 4. This indicates very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The best score a company can get is a 1 and the worst is 100.
Another rating where Dunkin gets really high marks is the Valuation Rating. The company scores a 6 in this category and that indicates that the company is seriously undervalued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization.
The PE Growth Rating is also above average at 22 and this points to outstanding earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents. A rating of 1 indicates highest PE growth while a rating of 100 indicates lowest PE growth.
One area of concern for Dunkin is the Price Growth Rating. The company scores an 85 in this category and that is the only indicator from Tickeron that is below average. The score indicates that the stock's price has grown at a slower rate than the average stock over the last 12 months.
Turning our attention to the technical picture, we see on the weekly chart that the stock has been trending higher over the last three and a half years. A trend channel has formed that defines the various cycles within the overall trend and the stock has just hit the lower rail of the channel.
We see also that the stock's weekly stochastic readings hit oversold territory and experienced a bullish crossover in the last few weeks. We saw a similar move in late 2018 before the stock went on a nice rally.
Despite the solid fundamentals and the upward trend in the stock, there is a ton of bearish sentiment toward the stock. There are 27 analysts covering the stock at this time with five "buy" ratings, 21 "hold" ratings, and one "sell" rating. This puts the buy percentage at a paltry 18.5%.
The stock also has a high short interest ratio of 5.41. That is well above average and indicates bearish sentiment from the short sellers.
As a contrarian this is almost an ideal situation—good fundamentals, the stock is trending higher, and there is an abundance of bearish sentiment directed at the stock. If the bearish investors switch camps and become bullish, it can help push the stock price higher.
