Dunkin’ Brands Group, Inc. – Value Analysis (NASDAQ:DNKN) : April 21, 2017

Capitalcube gives Dunkin’ Brands Group, Inc. a score of 50.

Our analysis is based on comparing Dunkin’ Brands Group, Inc. with the following peers – Wendy’s Company, Panera Bread Company Class A, Starbucks Corporation, McDonald’s Corporation, J. M. Smucker Company and Dean Foods Company (WEN-US, PNRA-US, SBUX-US, MCD-US, SJM-US and DF-US).

Investment Outlook

Dunkin’ Brands Group, Inc. has a fundamental score of 50 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • Compared to peers, relative underperformance last month is down from a median performance last year.
  • Dunkin’ Brands Group, Inc. currently has a negative book value but its current Price/Assets ratio of 1.57 is about median among its peers.
  • DNKN-US‘s book value of equity is not positive and suggests that that it is not meaningful to analyze its ROE versus P/E in order to determine whether the company has an operating or growth advantage.
  • DNKN-US‘s relatively high profit margins are burdened by relative asset inefficiency.
  • Compared with its chosen peers, changes in the company’s annual earnings are better than the changes in its revenue, implying better than median cost control and/or some economies of scale.
  • DNKN-US‘s return on assets currently and over the past five years is around the peer median and suggest that it does not have any particular operational advantages versus peers.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • DNKN-US‘s revenue growth in recent years and current P/E ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s capital investment seems appropriate for a business with peer median returns.
  • DNKN-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

DNKN-US is debt-constrained.

  • With debt at a relatively high 35.82% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 24.50%), and interest coverage level of 3.79x, DNKN-US seems debt-constrained.
  • All 6 peers for the company have an outstanding debt balance.

DNKN-US has maintained its Some Capacity profile from the prior year-end.

  • DNKN-US‘s interest coverage is similar to its four-year average interest coverage of 3.94x.
  • Though its interest coverage has remained relatively stable at 3.79x compared to 2015, its peer median has increased to 7.82x from 3.62x during this period.
  • Interest coverage fell 4.02 points relative to peers.
  • DNKN-US‘s debt-EV has declined 4.77 percentage points from last year’s high but remains above its four-year average debt-EV of 33.87.
  • The decrease in its debt-EV to 35.82% from 40.58% (in 2015) was also accompanied by a decrease in its peer median during this period to 24.50% from 31.00%.
  • Relative to peers, debt-EV rose 1.73 percentage points. Unlike the peer median, it is also above the 25% leverage benchmark.

Access the detailed analysis for Dunkin’ Brands Group, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Wendy’s Company 45.56 1.97 2.3 8.55
Panera Bread Company Class A 8.3 0.69 30.06 78.36
Starbucks Corporation 3.89 1.05 42.2 119.92
McDonald’s Corporation 20.86 1.4 8.77 23.53
J. M. Smucker Company 24.5 1.7 7.82 21.02
Dean Foods Company 31.19 1.25 4.12 40.64
Dunkin’ Brands Group, Inc. 35.82 1.43 3.79 9.34
Peer Median 24.5 1.4 7.82 23.53
Best In Class 3.89 1.97 42.2 119.92

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Company Profile

Dunkin’ Brands Group, Inc. operates as a franchisor of quick service restaurants, which engages in the service of hot and cold coffee, baked goods, and ice cream. It operates through the following segments: Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins International, and Baskin-Robbins U.S. The company was founded on November 22, 2005 and is headquartered in Canton, MA.


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