Is Green Mountain Coffee Roasters Well Positioned for the Future?

With shares of Green Mountain Coffee Roasters (NASDAQ:GMCR) trading around $72, is GMCR an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Green Mountain Coffee Roasters is engaged in the specialty coffee and coffee maker businesses. The company roasts Arabica bean coffees including single-origin, Fair Trade Certified, certified organic, flavored, limited edition, and blends offered in K-Cup portion packs, and whole bean and ground coffee selections. It also offers other specialty beverages, including tea, hot apple cider, and hot cocoa also offered in K-Cup portion packs. The coffee and relative drink trend has been exploding over recent years. Green Mountain Coffee Roasters makes this trend as personal as possible by bringing favorite beverages to the comfort of homes and businesses. As the specialty and related beverage trend operates in full force, look for companies like Green Mountain Coffee Roasters to see rising profits.

The maker of Keurig-brand single cup coffees and brewers posted higher-than-expected profit for the third quarter. Sales of Green Mountain’s K-Cups and single-cup brewers rose during the quarter, bringing in a profit of 89 cents per share for the quarter when analysts had expected the figure to be around 75 cents. Green Mountain has been working to offer more varieties of its K-Cups as grocery stores have begun introducing off-brand versions, Bloomberg reports.

T = Technicals on the Stock Chart Are Strong

Green Mountain Coffee Roasters stock has been in recovery mode from a major press setback that occurred a couple of years ago. The stock is currently on a strong move higher and looks poised to test all-time highs. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Green Mountain Coffee Roasters is trading between its rising key averages, which signals neutral price action in the near-term.

GMCR

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Green Mountain Coffee Roasters options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Green Mountain Coffee Roasters Options

53.24%

0%

0%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

December Options

Average

Average

January Options

Average

Average

As of Thursday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Green Mountain Coffee Roasters’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Green Mountain Coffee Roasters look like and more importantly, how did the markets like these numbers?

2013 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

42.63%

65.22%

50%

6.06%

Revenue Growth (Y-O-Y)

8.53%

11.26%

13.53%

15.61%

Earnings Reaction

16.81%*

-3.5%

27.84%

-5.35%

Green Mountain Coffee Roasters has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Green Mountain Coffee Roasters’s recent earnings announcements.

*As of this writing.

P = Excellent Relative Performance Versus Peers and Sector

How has Green Mountain Coffee Roasters stock done relative to its peers – Starbucks (NASDAQ:SBUX), McDonald’s (NYSE:MCD), and Dunkin’ Brands (NASDAQ:DNKN) — and sector?

Green Mountain Coffee Roasters

Starbucks

McDonald’s

Dunkin’ Brands

Sector

Year-to-Date Return

76.27%

51.15%

10.91%

41.62%

45.98%

Green Mountain Coffee Roasters has been a relative performance leader, year-to-date.

Conclusion

Green Mountain Coffee Roasters provides coffee and related products to eager consumers around the world. The maker of Keurig-brand single cup coffees and brewers posted higher-than-expected profit for the third quarter. The stock has been on a powerful path toward higher prices and looks poised to test all-time highs. Over the last four quarters, earnings and revenue figures have been on the rise, which has really excited investors in the company. Relative to its peers and sector, Green Mountain Coffee Roasters has been a year-to-date performance leader. Look for Green Mountain Coffee Roasters to continue to OUTPERFORM.

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