The stocks on this list have had a strong run during this year on the back of strong operating results. They have posted high double and triple digit gains. With the market gyrating, investors should wait for Mr. Market to be pessimistic before for jumping into these stocks.
Green Mountain Coffee Roasters (GMCR): The stock trades around $111.62, valuing the company at 108 times its trailing twelve months (ttm) earnings. Valuations of its competitors are more down to earth, Peet's Coffee & Tea (PEET) at 35.9 and Starbucks (SBUX) at 27.06
The stock has more than doubled for the year whilst its competitors recorded respectable double digit gains. It touched its 52 week high recently.
Management raised its fourth quarter and fiscal earnings guidance. Net sales for fourth quarter are expected to grow 100% to 105% and 98% to 100% for the full year. While prospects are bright for this company, no one in their right mind should be paying such a heavy price for future growth. Investors should wait on the sidelines for now.
LinkedIn Corporation (LNKD): Investors are certainly paying handsomely for future prospects at this social media company.
It currently trades about 225 times its forward earnings and is down about 9% from its IPO price. Investors should have considered another meaning for IPO, Its Probably Overpriced. There is no justification in this valuation when the company’s margins are razor thin, 4.4 % (profit) and 6.2% (operating) and that operates in a fiercely competitive industry.
This harks back to the heyday of the dot com boom. Sadly, those who haven’t learned from their mistakes are doomed to repeat them.
Netflix (NFLX): This stock has definitely popped. Until early July, the stock had a march over the market, soaring about 70%. Since then it has fallen dramatically and is down about 20% for the year. It trades at 36.4 times its trailing twelve months (ttm) earnings and 21 times its forward earnings.
There’s no news like bad news and this company has had plenty of it recently. Management should have anticipated that the hike in subscription fees was not going to be well received. This caused an uproar and rightly so, given the current economic situation.
The CEO released an apology, admitting arrogance but not apologizing for pricing issue,
This mistake leaves the door open for competitors such as DISH Network (DISH) and DIRECTV (DTV) to poach subscribers. The company recently lowered its subscriber forecast for the third quarter. This gave investors further ammunition to pummel its stock price.
The recent events must make interesting reading to value investors.
BJ's Restaurants (BJRI): The stock is priced around $46.60, valuing the company at 48 times its trailing twelve months (ttm) earnings and 35 times its forward earnings. Rival, Darden Restaurants (DRI) sells at a 13.6 times (ttm) with a 3.8% dividend yield.
It is up almost 31% for the year and was over 50% up in mid July when the stock touched its 52 week high.
The company reported better than expected results for the second quarter with solid growth in its fundamentals. Despite the weak economy, the company is expanding its operations. BJ’s is poised to open about 8 restaurants for the second half of the year which should help sustain earnings growth for the second half of the year.
In August, analyst firm Oppenheimer upgraded the stock from perform to outperform.
Caribou Coffee Company (CBOU): From a valuation perspective, this stock is the cheapest on this list. It trades at 8.6 times its trailing twelve months (ttm) earnings, much cheaper than Einstein Noah Restaurant Group (BAGL) at 19.8 times (ttm).
The stock lagged the market until early June and is up about 43% for the year. Second quarter results were solid with net sales advancing 16.5% over a year ago on strong showings across all its business segments. The Commercial sales segment was the star performer, recording a 94.3% gain whilst the Franchise segment was impressive with a 38% increase in sales.
Management is confident about its prospects for the second half of the year by raising its fiscal 2011 earnings guidance on sales growth of 11% to 13%.
Chipotle Mexican Grill (CMG): The stock has risen over 50% for the year and trades at 55.5 times its trailing twelve months (ttm) earnings. It touched a new 52 week high on September 19. It may be time for consolidation in this name.
The good news may already be priced in. Second quarter results were strong with solid gains in the fundamentals. The gross profit margin was lower compared to a year ago which was offset by robust growth in sales and net income. Chipotle has managed to grow its sales faster than its competitors. The balance sheet is strong. The cash position is higher than a year ago as liquidity improved.
Management expects growth in comparable store sales in the high single and low double digit range. In mid-August, Morgan Keegan upgraded the stock to market outperform.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.