Krispy Kreme Stock Still Bringing in the Dough By TipRanks

After sliding since its July 2021 IPO, Krispy Kreme (DNUT) stock has started to bounce back. Investors are diving back into the doughnut chain’s shares, as despite their initial negative reaction to its most recent earnings report, they are again bullish on its ability to deliver above-average growth.

The question now is whether this bounce back can continue. Admittedly, the stock is a bit pricey, even though it’s down around 21.6% from its recent high of $21.69 per share.

Barring any sort of market-wide correction that results in multiple compression, don’t expect worries about its rich valuation to become a top concern in the near-term.

Instead, shares have the ability to climb further. Why? Thanks to factors on its side that could help restore the fully bullish sentiment surrounding it just a few weeks back. This may not translate into massive gains from here for shares. Yet it may be enough to send it back to its high-water mark. This author is bullish on the stock. (See Krispy Kreme stock charts on TipRanks)

DNUT Stock and its Post-Earnings Rebound

For the quarter ending June 30, 2021, the company beat sell-side revenue estimates ($349.2 million, versus $333.4 million projected). At the same time, adjusted earnings for Krispy Kreme came in at 13 cents per share, versus 14 cents projected by analysts.

As mentioned above, investors weren’t too excited immediately after results hit the street. The day after results were announced, shares dipped lower. Yet following this, DNUT stock recouped its losses, and began to trend higher once again, as focus shifted towards the positive takeaways from its latest updates to its outlook.

Management now projects the company to generate between $62 million and $68 million in adjusted earnings, up slightly from analyst projections of around $61.8 million in adjusted income for the year.

Analysts already have high growth expectations for Krispy Kreme, as seen from estimates of 23.47% earnings growth in 2022. If it’s set not just to hit these numbers, but come in ahead of them? This richly-priced stock also stands to hold onto, and expand, its already rich valuation.

Valuation Concerns Will Remain on the Back Burner

At first glance, the forward price-to-earnings, or P/E, multiple of DNUT stock appears inflated. Granted, with direct peers like Dunkin Brands now privately held, it’s tough to assess valuation based upon comps. Still, it’s trading at a premium to other established restaurant plays with solid earnings growth prospects, like Starbucks (NASDAQ:).

It seems that, eventually, valuation concerns will weigh down on Krispy Kreme shares. Yet, barring a market correction that hits growth plays the hardest, this is unlikely to happen in the immediate future.

Why? There’s still much in play to help investor sentiment shift to bullish, and stay that way. Especially as there’s much pointing to it growing both sales and earnings at…