Krispy Kreme (DNUT +3.02%) has long been one of America's most recognizable consumer brands. But for investors, it is also a reminder that not every beloved brand translates into a winning stock.
After its 2021 initial public offering (IPO), Krispy Kreme's shares have lost more than half their value, recently falling to $4.40 per share (as of writing), near an all-time low. At first glance, that makes the stock look irresistibly cheap. The company trades at roughly 0.5 times sales, a fraction of what most consumer brands command. But as any seasoned investor knows, a low valuation doesn't always mean a bargain.
The question is simple: Is Krispy Kreme undervalued, or is it cheap for a reason?
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A brand with reach, and a reputation to match
There's no denying the global power of Krispy Kreme's brand. Founded in 1937, the company operates in over 40 countries and sells millions of doughnuts daily. Its nostalgic appeal and emotional connection with customers remain strong, even after decades of ownership changes and financial resets.
For a company with such visibility, its market capitalization of under $800 million seems small. That's less than the valuation of many regional coffee chains, let alone global food-service peers. On the surface, it appears to be a classic small-cap opportunity -- a well-known brand that the market has temporarily overlooked.
But dig deeper, and the valuation reflects something more fundamental: a business model still searching for consistency.
NASDAQ: DNUT
Key Data Points
An overview of the key financials
Krispy Kreme generated about $1.6 billion in annual revenue, yet continues to post operating losses. In 2024, the company swung from an operating profit of $13 million to a loss of $9 million. Even in the most recent quarter, ending September 2025, the company remained unprofitable, despite a modest improvement in adjusted EBITDA margin to 10.8%, up from 9.1% in the same quarter a year earlier.
That progress is encouraging, but it also highlights the problem. For a company with global scale, a 10% EBITDA margin is modest at best. Competitors like Starbucks operate at an EBITDA margin above 15%, even as the latter undergoes its own turnaround efforts. In short, Krispy Kreme doesn't yet earn enough on its capital to justify a higher valuation.
This inferior margin explains why the market is skeptical. A price-to-sales ratio of 0.5 looks appealing, but when profits are elusive and returns on invested capital are near zero, even a low multiple can still be expensive.
What are the bulls betting on?
Optimists point to early signs of a real turnaround. Management has been refranchising operations, closing unprofitable outlets, and shifting toward a more capital-light model. The strategy mirrors what other food-service success stories achieved in their transformation phases -- trading ownership for scalability and focusing on high-volume, high-margin distribution points.
There's also the potential for international growth. Krispy Kreme's brand is still underpenetrated in markets like Asia and Latin America, where premium Western dessert brands remain in high demand. If the company can replicate its U.S. awareness abroad, it could achieve steady mid-single-digit revenue growth, accompanied by rising margins over time.
For the bulls, Krispy Kreme appears to be a low-expectations turnaround story with significant upside if execution continues to improve.
Why aren't the bears convinced?
Skeptics counter that Krispy Kreme has been here before. The company has attempted multiple restructurings over the past two decades, each promising efficiency, growth, and margin expansion; yet none have delivered sustainable profitability.
Its "hub-and-spoke" distribution model, while innovative, remains capital-heavy and operationally complex. Each regional hub must maintain enough volume to justify its costs. On the one hand, the food company is closing down unprofitable stores, yet at the same time, it's losing operating leverage. Striking a balance here is a challenging task.
There's also the issue of execution risk. The company's partnership with McDonald's USA, once touted as a national growth engine, was terminated in 2025 after only a few months due to unprofitable unit economics. For bears, that episode encapsulates Krispy Kreme's challenge: scale is easy; profitable scale is not.
What does it mean for investors?
So, does Krispy Kreme stock look cheap? Yes, but only if the turnaround succeeds.
At current prices, the market is clearly pricing in pessimism. If margins climb meaningfully and international growth accelerates, the stock could offer multibagger potential from a small base. But if profits remain inconsistent or the business model fails to scale, "cheap" could quickly become "cheap for a reason."
For investors, the trade-off is simple: Krispy Kreme offers brand-driven upside and execution-driven risk.
It's potentially a high-return stock, but that too comes with a commensurate risk profile.
