Dunkin’ Brands Group, Inc. – Value Analysis (NASDAQ:DNKN) : January 9, 2017

Capitalcube gives Dunkin’ Brands Group, Inc. a score of 44.

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

Investment Outlook

Dunkin’ Brands Group, Inc. has a fundamental score of 44 and has a relative valuation of OVERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • Dunkin’ Brands Group, Inc. currently has a negative book value but its current Price/Assets ratio of 1.50 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.
  • Changes in annual revenues (relative to peers) are better than the change in its earnings (relative to peers), implying the company is focused more on revenues.
  • DNKN-US‘s return on assets has improved from below median to about median among its peers over the last five years.
  • The company’s relatively high gross and pre-tax margins suggest a differentiated product portfolio and tight control on operating costs relative to peers.
  • While DNKN-US‘s revenues growth has been around the peer median in recent years, the market seems to see faster growth ahead and gives its shares a higher than peer median P/E ratio.
  • The company’s capital investment program suggests it is under-investing in a business that is producing peer median returns.
  • DNKN-US seems to be constrained by the current level of debt.

Access our research and ratings on Dunkin’ Brands Group, Inc.

Leverage & Liquidity

DNKN-US is debt-constrained.

  • With debt at a relatively high 36.43% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 26.08%), and interest coverage level of 3.78x, 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 recent year-end.

  • DNKN-US‘s interest coverage is similar to its five-year average interest coverage of 3.59x.
  • Compared to 2015, interest coverage has remained relatively stable for both the company (3.78x) and the peer median (7.75x).
  • DNKN-US‘s debt-EV has declined 4.16 percentage points from last year’s high but remains above its five-year average debt-EV of 34.12.
  • The decrease in its debt-EV to 36.43% from 40.58% (in 2015) was also accompanied by a decrease in its peer median during this period to 26.08% from 27.03%.
  • Relative to peers, debt-EV fell 3.21 percentage points.

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 51.64 2.31 2.96 11.77
Panera Bread Company Class A 8.85 0.73 35.17 82.91
McDonald’s Corporation 21.76 0.96 9.05 23.25
Starbucks Corporation 4.55 1.05 44.57 139.37
Dean Foods Company 38.11 1.49 3.95 37.97
J. M. Smucker Company 26.08 1.38 7.75 19.75
Dunkin’ Brands Group, Inc. 36.43 1.55 3.78 9.27
Peer Median 26.08 1.38 7.75 23.25
Best In Class 4.55 2.31 44.57 139.37

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Company Profile

Dunkin Brands Group, Inc. operates as a franchisor of quick service restaurants, serving hot and cold coffee and baked goods, as well as hard serve ice cream. It operates through four segments: Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins International and Baskin-Robbins U.S. The company operates franchise restaurants under Dunkin’ Donuts and Baskin-Robbins brands. The Baskin-Robbins brand include hard-serve ice cream, soft serve ice cream, frozen yogurt, shakes, malts and floats. The Dunkin’ Donuts brand includes coffee, donuts, muffins, bagels and breakfast sandwiches. Dunkin Brands Group was founded on November 22, 2005 and is headquartered in Canton, MA.

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