Rocky Mountain Chocolate Factory: A Tasty, Free Cash Flow Laden, Stock Treat

Rocky Mountain Chocolate Factory, Inc., (RMCF) (Price as of yesterday's close: 14.21) engages in the manufacture of confectionery products, as well as in the operating and franchising of confectionery stores in the United States, Canada, Guam, and the United Arab Emirates.

Cash flow for its first quarter went from negative to positive when compared to its two prior first quarters. After five prior consecutive quarters of declining annualized free cash flow, the free cash flow turned around and has been increasing for the last three consecutive quarters. The Free cash growth rate is accelerating and is now at its fastest growth rate over the past 12 quarters. Free Cash Return on Equity [FCROE] is the highest that it has ever been.

By looking at and understanding the graphs below, you will see what I'm talking about.

click to enlarge

We need to also look at the 20 quarter chart to get the real picture.

Here you can see what I'm getting at and why this stock is poised to do well. If you look at columns 12 and 16 you can see the FC bar is red or negative compared to column 20. If you go down to line 11 you will see the Free Cash flow trailing tweleve month growth, notice prior to the last 3 quarters it was negative for 5 quarters. Notice this is the fastest growth over the last 12 quarters. In addition the last line ROE is the highest in the last 20 quarters.

(To learn about these graphs, check out the free tutorial.)

Due to the fundamentals shown here, we believe this stock will hold its own over the market sell off, and will move strongly higher when the sell off reverses.

RMCF 1-yr chart:

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