Green Mountain Coffee Roasters Is Still A Buy At This Level

| About: Keurig Green (GMCR)

Green Mountain Coffee Roasters (NASDAQ:GMCR) is a growth stock play. If you want to build a portfolio for the long haul you need to concentrate on growth in revenue and earnings and buy stocks at reasonable price earnings ratios. Despite all the hype this stock still hits all three.

Lately this stock has been outperforming the market as measured by the Value Line Index. Over the last 6 months while the market is about flat GMCR has soared over 87% as is evidenced in this percentage gain graph provided by Barchart:

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Forget what the pundits say and let's evaluate just the numbers.

Technical Factors:

  • Technical indicators provided by Barchart
  • 100% Barchart technical buy signal
  • Trend Spotter buy signal
  • Above its 20, 50 and 100 day moving averages
  • 8 new highs in the last month for a gain of 67.51%
  • 9 new highs in the last quarter for a gain of 76.79%
  • Still 30.22% off its 1 year high
  • Relative Strength Index 87.11%
  • Barchart computes a technical support level at 36.04
  • Recently traded at 42.27 with a 50 day moving average of 26.14

Fundamental Factors:

  • 11 Wall Street brokerage firms have assigned 14 analysts to run the numbers on this company
  • They predict revenue will grow by 15.70% this year and another 13.90% next year
  • Earnings are estimated to increase by 10.40% this year, an additional 15.10% next year and continue to grow annually by 18.58% for 5 years
  • The P/E ratio is 15.75 while the market P/E is 14.80 - not a big premium
  • The financial strength is B
  • Products include the popular Keurig Vue, K-Cups along with other brewers and accessories
  • K-Cup offerings include Starbucks, Dunkin' Donuts and the newly added Snapple Iced Tea products

Investor interests:

  • Wall Street analysts have issued 3 strong buy, 4 buy, 6 hold and a single sell recommendation to their clients
  • Analysts think investors entering at this level could see an annual total return in the 45% range over the next 5 years
  • The individual investor expressing on Motley Fool has 1,505 readers giving the stock a 70% chance to beat the market
  • Short sellers have been increasing from about 40 million shares in August to 51 million shares recently - as the price climbs they will have to cover their positions
  • TheStreet rates this stock a C

Sector comparisons:

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I always like to look at some of the other stocks in the same sector to see if I'm paying a premium to other opportunities. During the past 6 months GMCR gained 86%, Farm Brothers (NASDAQ:FARM) gained 37% while Starbucks (NASDAQ:SBUX) was down 5% and Caribou Coffee (NASDAQ:CBOU) also down 3%.

Farm Brothers

  • Revenue predicted to be up 4.70% next year
  • Earnings estimated to grow by 20.00% annually for next 5 years
  • Earning loss recently
  • Financial strength C
  • TheStreet rating D

Starbucks (SBUX)

  • Revenue projected to grow 12.20% nest year
  • Earnings to grow 18.18% annually for the next 5 years
  • P/E ratio 28.93
  • Financial strength A+
  • TneStreet rating A+

Caribou Coffee (CBOU)

  • Revenue expected to grow by 7.10% next year
  • Earnings tracking to grow by 24.00% annually for the next 5 years
  • P/E ratio 29.61
  • Financial strength B
  • TheStreet rating B-

Conclusion: Green Mountain Coffee Roasters (GMCR) is a high flyer that took a dive but the recent price momentum is more than just a dead cat bounce. Analysts view this company as a double digit opportunity with growth of both revenue and earnings and sells at a very slight premium to the market. This is a buy at this level. Since the stock has been volatile and has a large short interest I would advice closely following the moving averages and turtle channels to gauge any weakness in the support levels. My portfolio is full but if I had room I would not hesitate to add this one.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GMCR over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , , , Processed & Packaged Goods
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