Is It Time to Dump GMCR Stock?
Specialty coffee seller Keurig Green Mountain, Inc. (NASDAQ:GMCR) reports its fourth-quarter (4Q) earnings results after the bell today, but the market has already set a bearish tone for GMCR stock. Keurig stock lost close to 10% of its value on Tuesday and the Street is counting on the fall to continue.
Hedge fund manager David Einhorn has, once again, taken a short interest in GMCR stock, but his bet might go wrong this time. The last time he shorted the stock, he entered the position when the stock was trading in the $100.00 range. Since then, the stock seems to have tanked below its fair value. Einhorn’s Greenlight Capital has been the biggest loser of the year, with nearly all of Einhorn’s top long bets heading south. I wouldn’t be surprised if this bet follows suit.
Here are three reasons why I believe now is the right time to consider GMCR stock.
1. Cheap Multiples
When choosing between prospective investments, I tend to weigh their fundamental indicators and price multiples on a comparative scale. Keurig stock boasts relatively cheaper multiples and better fundamentals than the company’s peers Starbucks Corporation (NASDAQ:SBUX) and SodaStream International Ltd. (NASDAQ:SODA). GMCR stock has the lowest price-to-earnings ratio in the group. The company claims high margins, a high current ratio, and low debt to equity, all of which make GMCR stock a cheap, yet promising investment.
2. High Insider Stake
When company insiders hold significant stakes in a stock, they have a higher incentive to maximize the value of their holdings. In turn, this tends to work in favor of the company’s shareholders. Keurig insiders currently own more than 25% of the outstanding GMCR stock, which sets the company among the highest insider ownerships you’ll see on the market.
Insiders typically know more about the company than the average Joe and higher stakes among insiders mean company management has confidence in the stock’s future prospects. One would be a fool to not have faith in a stock with such significant insider stakes.
3. Yummy Dividends!
The most obvious reason to consider Keurig stock is its handsome 2.9% dividend yield. A healthy dividend-yielding stock is a great pick for long-term value investors, especially those seeking stability in their retirement portfolios. Keurig’s dividend yield is amongst the top companies in the packaged goods industry and stands above that of peers, in particular, Starbucks’.
Keurig stock’s dividend yield has consistently grown over the years and management has also been returning value to GMCR stockholders in the form of stock buybacks.
Bottom Line on GMCR Stock
The company’s latest partnership with The Coca-Cola Company and “Keurig Kold” is yet another reason to have faith in GMCR stock. Keurig’s 10-year partnership with Coca-Cola, whereby the latter will provide Keurig Kold a support on marketing and distribution, makes me hopeful for a turnaround.
Despite the widespread bearishness on GMCR stock, I believe the stock will bounce back in the coming year.