Is Green Mountain Coffee Roasters Inc. (GMCR) Headed for Greener Pastures?

Given that the private-label brands are still young in their life cycles, I don’t think Green Mountain Coffee is out of the weeds yet.

What initially drove down shares, though, wasn’t any number from the reported quarter, but guidance for the next. The company announced it was expecting 14% to 18% sales growth for the current quarter, missing the 20% the Street wanted. The later rebound likely occurred after analysts and investors digested the increased full-year guidance.

Foolish bottom line
Green Mountain’s results were fine. That’s about the best word I can think of for what I saw. So far, there isn’t much outcry about any accounting deficiencies, suggesting that we can take these numbers as representative of the facts. But the elephant in the room remains private-label K-Cups. The generics have only been allowed on shelves since October, and there is plenty of time for word of mouth to spring into action and whisper the sweet sound of bargains into consumers’ ears. And let’s not forget that coffee overlord Starbucks Corporation (NASDAQ:SBUX) has trekked into the space as well with its Verismo single-serve espresso and coffee machines.

With a trailing-12-month P/E of 20 and a forward ratio of 14.85, I find the shares richly valued with a shortening growth runway. Investors who are hoping the company’s shares will return to their former glory are, in my opinion, gravely mistaken. If you need a caffeine fix for your portfolio, your best bet may still be Starbucks for reliable, stable growth.

The article Is Green Mountain Headed for Greener Pastures? originally appeared on Fool.com and is written by Michael B. Lewis.

Fool contributor Michael B. Lewis has no position in any stocks mentioned. The Motley Fool recommends Green Mountain Coffee Roasters and Starbucks. The Motley Fool owns shares of Starbucks and SUPERVALU.

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