Financial Performance
Dunkin Donuts
Profitability
- Gross Margin (TTM): 50.26%.
- Operating Margin (TTM): 21.43%.
- Pretax Margin (TTM): 17.16%.
- Net Profit Margin (TTM): 13.09%.
Cash Flow Ratios
- Price to Cash Flow (MRQ): 6.15.
- Price to Free Cash Flow (TTM): 20.84.
Management Effectiveness (Interpretation of Company’s Operational Efficiency)
- Return on Equity (TTM): 17.54%.
- Return on Assets (TTM): 8.1%.
- Return on Investment (TTM): 3.35%.
Bankruptcy Score (Altman Z-Score)
Current Altman Z-Score: 1.62, indicating Dunkin’ Brands Group is in the “Distress Zones”.
DuPont Analysis
Profit Margin: 10.60%.
DuPont earns approximately 10.60 cents in profit for every dollar of revenue.
Asset Turnover: 3.40.
For every dollar of assets, DuPont generates about $3.40 in sales.
Equity Multiplier: 7.30.
This indicates a financial leverage factor of 7.30, meaning that DuPont’s assets are financed by a combination of debt and equity at this ratio.
Return on Equity (ROE): 262.66%.
This ROE suggests a high return on the equity invested by shareholders. A high ROE, driven by a high equity multiplier, can indicate effective use of leverage, but it also implies higher financial risk.
Stock Price Performance
USD 106.48.
Expected Stock Price Over the Next 12 Months
1-Year Forecast: USD 112.410 (Investing, 2023a).
Krispy Kreme
Profitability
In the first quarter, net revenue grew 12.5% to $419.0 million, and in the second quarter, it grew 9.0% to $408.9 million. In the third quarter, net revenue increased by 7.9% to $407.4 million.
Cash Flow Ratios
For the third quarter of 2023, Krispy Kreme reported a net loss of $38,530, with net cash provided by operating activities at $44,032. However, the company had a free cash flow of $(44,573).
Interpretation
The company’s growth in net revenue indicates a positive trend in profitability.
Bankruptcy Score
Krispy Kreme has an Altman Z-Score of 0.94. A Z-score lower than three is indicative of heightened bankruptcy risk.
DuPont Analysis
Net Income: $1.6 million
Revenue: $418,950 thousand (or $418.95 million)
Average Total Assets: $3.18 billion
Average Total Equity: $1.2 billion
Profit Margin
Approximately 0.382%. This indicates that Krispy Kreme earned about 0.382 cents in profit for every dollar of revenue.
Asset Turnover
Approximately 0.132. This suggests that Krispy Kreme generated about 13.2 cents in sales for every dollar of assets.
Equity Multiplier: 2.65. This ratio indicates the degree of financial leverage used, showing that Krispy Kreme has financed its assets 2.65 times more with debt than with equity.
Return on Equity (ROE)
Approximately 0.1333%. ROE combines the effects of profit margins, asset management, and financial leverage, reflecting the return on shareholder equity.
Stock Price Performance
USD 13,00.
Expected Stock Price Over the Next 12 Months
$15.05 with a high price target of $19.00 and a low price target of $13.00 (Investing, 2023b).
Comparative Financial Analysis
The financial ratios of Dunkin Donuts and Krispy Kreme reveal distinct aspects of their historical performance and prospects. Dunkin Donuts exhibits robust profitability with a gross margin of 50.26% and a net profit margin of 13.09%, indicating efficient cost management and strong revenue generation. Its high Return on Equity (ROE) of 17.54% and Return on Assets (ROA) of 8.1% reflect effective management effectiveness in utilizing shareholder equity and assets, respectively—however, the distressing Altman Z-Score of 1.62 signals potential financial instability, which might affect prospects.
In contrast, Krispy Kreme’s financials show a different story. Despite an increase in net revenue, indicating growth potential, its profit margin is significantly lower at approximately 0.382%, reflecting challenges in translating sales into net Income. The low ROE of 0.1333% and a high equity multiplier of 2.65 suggest a heavy reliance on debt financing, which could pose risks for future stability, as evidenced by its alarming Altman Z-Score of 0.94.
In summary, Dunkin Donuts has demonstrated historical efficiency and profitability, but its financial health might be a concern. While showing revenue growth, Krispy Kreme faces profitability and leverage challenges that could impact its future performance. Both companies present distinct risk profiles and investment opportunities based on their financial health and market strategies.
References
Investing. (2023a). Dunkin brands (DNKN). Web.
Investing. (2023b). Krispy Kreme Inc. Web.