With shares of Dunkin' Brands (NASDAQ:DNKN) trading around $38 after Dunkin's earnings, is DNKN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock's Movement
Dunkin' Brands owns, operates, and franchises quick service restaurants under the Dunkin'' Donuts and Baskin-Robbins brands worldwide. The company operates in four segments, including Dunkin' Donuts U.S., Dunkin' Donuts International, Baskin-Robbins International, and Baskin-Robbins U.S. Its restaurants offer coffee, donuts, bagels, ice cream, frozen beverages, baked goods, and related products. The increasing popularity that the product offerings being seen by Dunkin' Brands is fueling excellent growth for the company. As consumers continue to enjoy the Dunkin' Brands products, look for the company to see rising profits well into the future.
T = Technicals on the Stock Chart are Strong
Since its initial public offering in 2011, Dunkin' Brands stock has witnessed a wonderful uptrend of higher highs and higher lows. The stock is now trading near all-time highs and shows no signs of slowing just yet. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Dunkin' Brands is trading above its rising key averages which signal neutral to bullish price action in the near-term.
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(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Dunkin' Brands options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Dunkin' Brands Options | 24.48% | 43% | 40% |
What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| May Options | Flat | Average |
| June Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Dunkin' Brands's stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Dunkin' Brands look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 16% | 131.50% | 750% | 933% |
| Revenue Growth (Y-O-Y) | 9.45% | -4.04% | 5.02% | 9.82% |
| Earnings Reaction | 3.66% | 2.04% | 1.81% | -3.05% |
Dunkin' Brands has seen increasing earnings and revenue figures over the last four quarters. From these figures, the markets have been pleased with Dunkin' Brands's recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has Dunkin' Brands stock done relative to its peers, Starbucks (NASDAQ:SBUX), Yum! Brands (NYSE:YUM), McDonald's (NYSE:MCD), and sector?
| Dunkin' Brands | Starbucks | Yum! Brands | McDonald's | Sector | |
| Year-to-Date Return | 16.73% | 13.27% | 1.82% | 16.04% | 14.28% |
Dunkin' Brands has been a relative performance leader, year-to-date.
Conclusion
Dunkin' Brands provides products that fulfill the cravings of many consumers and will continue to do so well into the future. The stock has been in a strong uptrend since its initial public offering, just a few years ago. Earnings and revenue figures have been growing at an excellent pace in recent quarters which has really pleased investors. Relative to its peers and sector, Dunkin' Brands is a year-to-date performance leader. Look for Dunkin' Brands to continue to OUTPERFORM.
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