We’ve talked before about how rough the coronavirus pandemic has been on American businesses … especially restaurants.
I mentioned McDonald’s Corp. (NYSE: MCD) in an earlier story. (You can check that out here).
But another restaurant recently reported a 20% drop in revenue during the second quarter as customers continue to avoid going out in public: breakfast and coffee haven Dunkin’ Brands Group Inc. (Nasdaq: DNKN).
Its quarterly income fell more than $23 million year over year, and its share price dropped more than 3% after those results were released on Thursday.
Using Money & Markets Chief Investment Strategist Adam O’Dell’s proprietary stock rating system, we look closer at Dunkin’ Brands Group Inc. to determine if the stock is a buy for investors like you and me.
Dunkin’ Is High on Growth, Low on Value
Using Adam’s stock rating system, Dunkin’ rates a 50 overall — it’s right in the middle of all other stocks.
It rates high on growth and quality, but lower on size and value.
Dunkin’s Losses Equal the Industry
Here’s what the analysis tells us:
- Growth — Dunkin’ rates the highest on growth at 85 — only 15% of all other stocks rate higher. Its earnings per share have grown 11.8% in the last five years and its sales have jumped 12.8% during that same time.
- Quality — The company rates a 75 on quality — only 25% of all other stocks are better. Dunkin’s solid cash flow and strong margins — both rate over 90 — are the drivers for this factor.
- Volatility — Dunkin’ has mild volatility — ranking it at 70 in this metric.
- Momentum — It earns a 35 on momentum — 65% of all other stocks have stronger momentum. Its trailing returns are only better than 45% of all other stocks, supported by its weaker trading volume.
- Value — In relation to all other stocks, Dunkin’ earns a rating of 27 on value. This is backed up by higher price to book, price to sales and price to cash flow.
- Size — Dunkin’ earns a rating of 11 on size with very high liquidity of the stock.
What You Should Do Now
Dunkin’ has taken a hit thanks to the COVID-19 pandemic.
Adam’s stock rating system puts it right in the middle of all other stocks, meaning it is far from a winner.
His system points to the fact that the stock doesn’t carry much momentum, and it’s overvalued.
Once the coronavirus gets under control and life is back to normal, perhaps Dunkin’ can move back into a value mode.
But, for now, Dunkin’ is a hands-off stock.
