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By Dee Gill

Investors who tuned out the alarm bells sounding around the earnings miss at Krispy Kreme Doughnuts (NYSE:KKD) last August have been duly rewarded for their loyalty. An initial share price drop on the announcement has turned into a 14% rise, bringing total gains for the past 12 months to more than 235%. But disappointing results this time around night not get such a pass.

KKD Chart
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KKD data by YCharts

The shareholder faith exhibited in that chart has sent earnings valuations on Krispy Kreme shares well above several well-known investment competitors, like Dunkin Brands (NASDAQ:DNKN), Starbucks (NASDAQ:SBUX) and Panera Bread (NASDAQ:PNRA). Krispy Kreme’s forward price-to-earnings ratio, which often lags this group, is suddenly much higher.

KKD PE Ratio (Forward) Chart
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KKD PE Ratio (Forward) data by YCharts

Those companies are in expansion mode too, but earning more money at it. Revenue-wise, Starbucks and Panera are both expected to grow faster than Krispy Kreme this year and next, and Dunkin’ is expected to match its growth.

KKD Revenue (Quarterly YoY Growth) Chart
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KKD Revenue (Quarterly YoY Growth) data by YCharts

Krispy Kreme reports fiscal third quarter results Dec. 2, and investors should be looking for reassurances that its shares are worth their outsized prices. Krispy Kreme shares are hot because it’s rolling out stores internationally and its U.S. stores are gaining sales and traffic. Any impediment to fulfilling those plans could be reason to sell. The company’s earnings miss last quarter was reportedly caused by one-off costs, in part associated with refinancing debt, and investors won’t like to be surprised by expensive esoteric details again.

One note of interest in the report will be how many, if any, shares Krispy Kreme itself is buying at these levels. The company, which bought back $20 million of its stock last year, approved buying another $50 million in July. It was an unusual move for a growing company that doesn’t need to boost its share price. The directors said the company had cash flow in excess of what was needed for its expansion plans; in essence, they couldn’t think of anything more productive to do with the money.

KKD Free Cash Flow (NYSE:<a href='http://seekingalpha.com/symbol/ttm' title='Tata Motors Limited'>TTM</a>) Chart
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KKD Free Cash Flow (TTM) data by YCharts

Krispy Kreme has done well with a difficult recovery, and perhaps the company has a nice future seeding donut shops internationally. But it’s hard to see the specialness here as an investment, with the company’s modest growth and somewhat unimaginative spending. Unless Krispy Kreme can continually demonstrate exceptionalism in its earnings reports, the shares probably won’t be so special for long.

Dee Gill, a senior contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine. She can be reached at editor@ycharts.com. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.

Source: Hungry For Krispy Kreme? At What Price?