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Krispy Kreme Doughnuts (KKD) is not a stock I'm likely to buy. It's a single-digit equity, and the company has had its problems over the years. And even though it has seen its share of run-ups in the recent past, as the this chart indicates, I still am reticent to trade it (although, as a trading vehicle, I'm sure some of the Wall Street pros love it).
What does the most recent fundamental data say about the business? Actually, it isn't too bad, for the most part. Net income went up 100% to 6 cents per share in Q1, and same-store sales rose 3.4%, according to this BusinessWeek.
Of course, I did say "for the most part" in terms of things not being so bad. What was the part that didn't appeal to me? Cash from operations. The company generated roughly $9 million from operating activities last year at this time, according to the press release; in the past three-month period, only $1.7 million was produced.
Maybe that will turn out to be an anomaly, and the rest of the year will be better. But even with the prettier earnings picture, and the nice comps, I'm still going to avoid Krispy Kreme. I just don't feel a need to add this one to my portfolio when more sound alternatives exist.
The stock was up in pre-market trading by 11% around 8 AM, and reached the $4 mark early in the trading day. So, the company will perhaps have a good session today (although it's impossible to predict). If you do want to trade this idea, I wouldn't think you'd want to buy it on an up day; I wouldn't trade momentum here. I'd be way more comfortable on a significant plunge when all the markets are down.
Disclosure: I don't own any company mentioned; positions can change without notice.
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