After-Hours Trading Gave Krispy Kreme Gooey Dough-Cuts

Tickers in this article: KKD
NEW YORK (TheStreet) -- Following Monday's third-quarter earnings release, Krispy Kreme suffered a 14% haircut in after-hours trading. That was in addition to a 3% pullback during regular trading. It all added up to a very rough day for the doughnut maker, as investors digested the earnings release and were not satisfied.

The numbers were actually not bad -- revenue rose 7% for the quarter, coming in at $114.2 million, and was in line with the consensus estimate. Earnings, at 16 cents, were a penny ahead of the consensus. But after a 167% run by shares over the past year, investors were looking for more and did not get it. In fact, they might have been dismayed that the company lowered guidance for 2015; putting earnings per share in the $0.71 - $0.76 range, which is below the previous $0.77 consensus.

Yesterday's action was like deja vu all over again as shares suffered a similar fate following August's second quarter release. An earnings miss of 2 cents sent shares down 15% on Aug. 30, but the stock recovered all of that lost ground over the subsequent five weeks, then rallied further to a nine-year high. During the past year, there has rarely been a dull moment following a Krispy Kreme earnings release. Following the first quarter release in May, which produced better than expected results, shares jumped more than 21%. And following last year's third quarter release, shares rose 23%.

And so it goes with a company that had been all but forgotten just a few years ago -- and appears to be making the most of its second chance at life after nearly imploding. This rebirth, of course, comes with a price especially once investors have re-embraced the story, which has sent shares up more than 300% in the past 16 months, and 2000% in the past five years. It is difficult to continually exceed ever-growing expectations, and the price for not doing so is very high. KKD Chart KKD data by YCharts

The balance sheet remains very strong. The company ended the latest quarter with $67 million in cash, and less than $2 million in debt. Shares currently trade for about 30 times 2015 consensus estimates, a number that would typically make this value investor cringe. However, I continue to see great value in this brand and consider its current enterprise value of about $1.3 billion (based on yesterday's after hours closing price), to be a rather small price tag for an iconic brand that is back in growth mode.