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This Restaurant Penny Stock’s Rocketing Higher

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This Restaurant Penny Stock’s Rocketing Higher



When it comes to buying stocks, there are many sectors to choose from. Obviously, we all want to see
increasing corporate earnings, as this eventually drives share price appreciation. While many investors in
penny stocks look towards junior mining companies, I would caution against being too heavily weighted in
any one category. Diversification is of extreme importance when buying stocks for one’s portfolio, as
corporate earnings across segments do tend to vary during an economic cycle.

One company that is as far away from mining as you can get is Krispy Kreme Doughnuts, Inc. (NYSE/KKD).
While I’m not suggesting that consuming doughnuts in large quantities is great for your health, it seems that
enough people are doing so that the firm is able to continue driving revenue and corporate earnings.

For the third quarter of 2013, Krispy Kreme reported revenue of $107.1 million, an increase of 8.5% from the
same quarter last year. Adjusted corporate earnings were $8.3 million, up 76% from the same quarter last
year. Same-store sales, an important metric when considering buying stocks in the restaurant field, rose
6.8%, which is the 16th consecutive quarterly increase. (Source: Krispy Kreme Doughnuts Inc. press
release, “Krispy Kreme reports financial results for the third quarter fiscal 2013,” November 19, 2012,
accessed December 14, 2012.)

When buying stocks in such a market segment, not only is it important to see corporate earnings increase,
but also to see same-store sales move up as well. This is a sign that the company is able to generate
organic growth within existing stores, and not just through the expansion of new stores.

The company had 731 Krispy Kreme stores at the end of the third quarter, of which 635 are franchised, an
increase of 20 for the period. Another consideration when buying stocks is whether the firm can continue
growing corporate earnings. Not only is Krispy Kreme building and opening new stores, but the ones already
open are seeing strong growth in revenue. This is certainly bullish for corporate earnings going forward.

The CEO and president, James H. Morgan, stated in the financial release “Given our strong third quarter
and year-to-date performance, we are pleased to be increasing our earnings outlook for fiscal 2013 and
projecting continued double digit earnings growth for fiscal 2014.” (Source: ibid)

When buying stocks, looking for future growth in corporate earnings is the key. With such an optimistic
outlook by the CEO, one should have this company on one’s watch list.
                                   Chart courtesy of www.StockCharts.com

I already made my readers aware of this stock back in early October when it was trading at $7.72. At that
time, while I expected corporate earnings to continue growing, I also stated that it is better to look at buying
stocks for strong companies such as Krispy Kreme on pullbacks.

At that time, the stock had already run-up, and I was expecting a slight pullback. We did indeed get this
pullback in early November, at which time it was quite a good opportunity to accumulate shares. Once
again, the strongcorporate earnings report has shot up the price of the stock, and I would look for a more
advantageous entry point for this company.

One should never feel an urgent need to rush when buying stocks. A company such as Krispy Kreme is
continuing its expansion plans for the next few years. Looking for pullbacks in the stock price while corporate
earnings remain strong is a good long-term strategy when buying stocks.

				
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