Krispy Kreme Doughnuts
While chewing on today's news, I was reminded of a story I wrote on Krispy Kreme 15 months ago. At the time, I was puzzled how a company whose future growth rate was so well known could carry such a high valuation (its trailing P/E ratio was over 100). Today, the stock is 20% higher and its P/E has drifted down to 68.
I compared the donut king with the auction king, eBay
True, they would be in for quite a fall if their earnings took a hit similar to the one so many tech companies absorbed over the past couple of years. Both are volatile and risky, and are not recommended for new or conservative investors. But the lesson here is that great long-term business performance can provide its own margin of safety.