Krispy Kreme Doughnuts Inc. has seen shares soar since its initial public offering in April 2000 to an all-time high of US$43.50 – more than eight times the split-adjusted IPO price of US$5.52 per share. Company insiders have been cashing in on the inflated share price, reports the Wall Street Journal. Chairman and CEO Scott A. Livengood has sold 190,000 of his 1.2 million shares, while four senior vice presidents have also sold significant portions of their share holdings.
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Total sales or planned sales from insiders rack up to US$109.2m, much of this from franchisees, directors and other shareholders. The move has done nothing to dampen the performance of Krispy Kreme shares on the stock exchange. News that the company is looking to launch an international expansion campaign has kept the stock buoyant, as have better than forecast first quarter profits and a listing on the New York Stock Exchange.
Analysts have expressed concerns that the stock is overvalued, as it is currently trading at about 99 times the group’s projected earnings for the fiscal year due to end January next year, or about five times the industry average of 20 times earnings estimates. Merrill Lynch analyst Peter Oakes is quoted in the Journal as having reservations on the company’s ability to sustain same-store sales and profits impetus at levels to justify the stock’s current valuation. Merrill Lynch has imposed an intermediate term sell recommendation on the stock. And that’s exactly what insiders are doing.
What do you think? Is the stock overvalued? Go to the just-food.com home page and cast your vote.
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