The Right Coffee Shop to Enlighten Your Portfolio: Starbucks Corporation (SBUX), Green Mountain Coffee Roasters Inc. (GMCR), Dunkin Brands Group Inc (DNKN)

Is Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) a buy?

Green Mountain has reported outstanding results for the last two quarters. Its coffee machines are spread across offices, banks, and kitchens. Although the company has performed really well in terms of numbers, its shares have plunged around 30% because of news like excessive inventory growth, an important patent expiration, and its bad accounting practices.

The company’s focus on a growing at-home premium coffee brewing market is the main reason behind its exceptional performance. This section of the market is growing too, and with more competition I believe this market should expand further. Currently, Starbucks’ Verismo is creating some trouble, but Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) should be in a position to tap more market if it offers better products to stand up to the competition. The fall in price should be taken as an opportunity to buy the stock, as it still has upside potential.

How is Dunkin Brands Group Inc (NASDAQ:DNKN) doing?

Dunkin’ Brands is an established brand with potential to grow. It opened 291 new stores in 2012, which means the company has a lot of growth potential. It offers high quality coffee at reasonable prices to coffee lovers, as it uses 100% Arabica coffee beans.

Dunkin Brands Group Inc (NASDAQ:DNKN)’ has a very high debt-to-equity ratio of 5.29, with comparatively low cash levels of $252.6 million. The company’s revenue has also been inconsistent over the past few years. It has been bad at marketing and innovation, and this has affected its growth potential. Moreover, it does not offer a comfortable experience like Starbucks Corporation (NASDAQ:SBUX).

Final words

Starbucks currently dominates the coffee shop industry, and has tremendous scope to grow in Asia. Its acquisition also looks strategic with a far-sighted plan to increase current comp sales, and adapt well to the need of the hour. I strongly believe it’s the best pick among peers.

Green Mountain, too, should do well as its coffee machines are spread well across the market. Its revenue stream should be good as the sales of K-cups look promising in the near future. I am optimistic that the stock will provide a good upside in the near term once coffee prices stabilize.

Dunkin Brands Group Inc (NASDAQ:DNKN) is trying aggressively to increase its market, and is trying to tap the market by selling coffee at a reasonable price. I believe it is trying to follow the footsteps of Starbucks, but lags in the experience offered by it. Its weak balance sheet is another cause for concern. I suggest staying away from this stock.

The article The Right Coffee Shop to Enlighten Your Portfolio originally appeared on Fool.com and is written by prateek attalani.

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