September 27, 2012
Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, coffee shop operator Dunkin' Brands Group (Nasdaq: DNKN ) has received the dreaded one-star ranking.
With that in mind, let's take a closer look at Dunkin's business and see what CAPS investors are saying about the stock right now.
||Canton, Mass. (2004)
||CEO Nigel Travis (since January 2009)
CFO Paul Carbone (since June 2012)
|Trailing-12-Month Return on Equity
||$218.7 million / $1.5 billion
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 40% of the 247 members who have rated Dunkin' believe the stock will underperform the S&P 500 going forward.
Just yesterday, one of those bears, TMFHarleyQuinn, showed skepticism over management's business strategy:
Though the company has great expansion plans and many exciting news announcements, there is an underlying and fundamental issue with its structure as an "Asset - Light" business . The company has almost $2B in debt, backed by an overinflated valuation of its Trade Name. Though this is a company that makes its money through franchise and licensing agreements, hence lending to the idea of an asset-light strategy, backing up a substantial amount of debt with an Intangible Asset (Trade Names, etc.) is a very risky move. I will be curious to see what happens in the next 2-3 years with all of the expansions, but I think that in the end the company will have to come up with a new strategy, which could create investor-averse conditions.
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