1-Star Stocks Poised to Plunge: Green Mountain?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, specialty coffee company Green Mountain Coffee Roasters (Nasdaq: GMCR  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Green Mountain's business and see what CAPS investors are saying about the stock right now.

Green Mountain facts

Headquarters (founded) Waterbury, Vt. (1981)
Market Cap $6.8 billion
Industry Packaged foods
Trailing-12-Month Revenue $3.2 billion
Management CEO Lawrence Blanford (since 2007)
CFO Frances Rathke (since 2003)
Return on Equity (average, past 3 years) 14.2%
Cash/Debt $84.2 million / $488.4 million
Competitors Farmer Brothers
Peet's Coffee & Tea

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 35% of the 1,473 members who have rated Green Mountain believe the stock will underperform the S&P 500 going forward.

Just last month, one of those Fools, hiddenflem, offered several reasons to stay on the sidelines:

(1) There are now very good alternatives out there to [K-Cups] including Fog Chaser and other great [K-Cup] like pods that fit in the machine that are much cheaper ... (2) fill it yourself cups are clearly thriving in sales at [Amazon], it's no longer a secret that you can pack your own (3) patent expiry later this fall ... less certain of how this will affect sales but there are rumors out there swirling about big rivals coming into the business. Will [Green Mountain] be successful in getting current consumers to pay up for fancier machines, pay an even greater premium for more sophisticated pods or will people consider current options to be "good enough"? I think the latter.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Green Mountain and Starbucks, as well as writing covered calls on Starbucks. Motley Fool newsletter services have recommended creating a lurking gator position in Green Mountain. The Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (5) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 13, 2012, at 10:01 AM, jeffgrace7 wrote:

    Did you just quote a gut calling himself Hiddenflem? BTW he has a 47% accuracy rating. Technically a monkey could do better. His number one concern neglects the fact that these "alternatives" are illegal and the makers are in litigation. Number 2, the fill your own cup systems have been around for 7 years and have no bearing on earnings moving forward. Why would someone pay of r the convenience of a k-cup and brewer and then pack your own cup. Why not just buy a regular coffee machine for 20% the price? His third concern he is less certain about though, so I am not sure where to go with this one, since he seems to be so sure the PPS will nose dive. Third party bagged coffee makes up 5% of sales, why would single serve be different? Also, GMCR spent billions in Capx to build these k-cup lines and distribution networks. Who is going to invest this kind of money, when the VUE on scene threatening any and all investment in the previous platform.

  • Report this Comment On April 13, 2012, at 10:33 AM, kamig wrote:

    For any product there are alternatives and perhabs cheaper ones. But are we looking at the price or the quality? If you like a product (brand), you will not change it with a cheaper one. GMCR is a growing company and as long as I see growing numbers, I dont believe your foolish story!

  • Report this Comment On April 13, 2012, at 11:18 PM, CharlieTav wrote:

    GMCR earnings will exceed analyst projections first calendar QTR 2012. They smashed expectations fourth calendar QTR 2011.

    1- First full QTR of Starbucks sales. Last QTR Starbucks shipments started halfway thru QTR ( 2nd week Nov11)

    2- Strong K-cup coffee machine sales Holiday season. Result in strong sales this QTR for K-cups.

    3- Product identification by consumer

    Long Term:

    1- Quality

    2 -Cost effective successful mass distribution

    3- Starbucks committed to GMCR as supplier for low pressure machine coffee. Apparently this an agreement between Starbucks and GMCR that Starbucks cannot compete with low pressure machines , only high pressure machines.

    4- Competition will lose money distributing an inferior product. Major cost is in packaging and distribution. Why should a company intentionally lose money.

    GMCR is here to stay

    K-cup America's way to drink coffee

  • Report this Comment On April 16, 2012, at 11:49 AM, bialecki wrote:

    Hearing much about GMCR's patents that are going to expire later this year (2012) that protect the K-cup, per your article above "it's no longer a secret that you can pack your own (3) patent expiry later this fall ..." I did some research on this and I can only find one patent that was filed 20 years ago; Sylvan et al on 9-16-1992, patent# 5,325,765, however it was granted by the USPTO on 7-5-1994, hence an expiration date of 7-5-2014. Maybe all the authors that state patents are going to expire this year should reference them for accuracy in their articles. Please correct me if I am wrong and state the patent(s) that are going to expire this year.

  • Report this Comment On April 17, 2012, at 1:59 PM, bialecki wrote:

    Correction to my blog above. The Keurig patent noted above (5,325,765 does expire on September 16, 2012). However as good as the claims are, this single patent is not the only patent that is protecting the current K-cup design. With my research notes that there are many more GMCR patents with expiration dates out in the future. The claims of the aforementioned patent are fairly broad (a good thing for GMCR) however, since Keurig has established the K-cup format and has sold many coffee machines it would be a hard barrier to break for another company, i.e., P&G, Kraft, PEETS and others to try to break into. Remember when Kodak tried to get into the instant photo game and establish a new instant film format? It failed terribly and Polaroid continued as the predomination player. So even if a competitor applied all of the 16 claims within the patent, once again it would be hard for the competitor to break into this field. I am sure that GMCR has many "Trade Secrets" in addition to their patents that makes it that much more difficult to break into. My money will continue to be on GMCR.

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