Green Mountain's stock, which trades on the Nasdaq, has risen 16% over the past six months and 9% in a year. Starbucks' stock has declined 33% in the past six months and 44% over 12 months. Looking at peer valuation in the food-products industry, Green Mountain's shares are expensive based on price to book, price to cash flow, price to earnings and price to sales. Nevertheless, the stock is well below its 52-week high of $44.75 and may have upward momentum if the company continues its strong performance in the fiscal second quarter.
There are few companies that are increasing earnings in the current economic environment, which makes GMCR attractive. Our quantitative model evaluates about 5,300 publicly traded companies and gives only 9.15% of them "buy" recommendations. GMCR has held that rating since May 15, but recently jumped into our top 100. The company has a market capitalization of $944.9 million, average daily trading volume of more than 500,000 shares, and a beta of 0.79, indicating strong stock-market correlation. Green Mountain does not pay dividends.
GMCR has grown from a café in rural Vermont into a major player in the Northeast food-products market. The company purchased Tully's Coffee in September and now has an established position on the West Coast. GMCR's multi-channel distribution strategy is ideal for developing brand awareness -- people see the coffee in offices, homes and the supermarket. Because many coffee drinkers have a brand preference, this increases the likelihood that the company will develop a loyal customer base.
Although reputable competitors such as Dunkin' Donuts and Starbucks present a legitimate threat to growth potential, Green Mountain is positioned to gain market share during the recession because it doesn't operate stores and its products are convenient and affordable. After all, it's a heck of a lot easier to drink free coffee at the office than it is to walk down the street to Starbucks and shell out cash for overpriced joe.
Research analysts are bullish on the stock. GMCR is covered by eight sell-side firms and receives five "buys," two "holds," and one "sell." As an added bonus, Green Mountain has received consistent accolades for its commitment to responsible corporate citizenship. The company donates at least five percent of pretax profits to social or environmental causes, so good karma comes with each K-Cup. There are few stocks right now that merit attention, but GMCR is worth consideration. This company is selling coffee with character and turning a solid profit. As always, consider macroeconomic and idiosyncratic risk before investing.