Beyond inflation fears, market crashes, and rates anxiety, one of the more prominent and consistent themes of the last two years has been a white hot IPO market.
We skeptically wrote some-time ago about Oatly’s IPO – a company which, you guessed it, sells oat milk. At the time we pointed out that the company was trading at around 27x sales, a pretty rich valuation by historical standards.
Now we have $3 billion donuts. Krispy Kreme, a company which sells donuts and struggles to turn a profit, last traded at $19.12 per share – giving it a market capitalisation of over $3 billion.
Investors can now dunk their donuts in oaty water!
The market seemed to like, but not love the IPO. The stock popped during its first session (as is customary), closing up 23% last Thursday. It then proceeded to crash on Friday, with Krispy shedding 8.95% during the session. So, not the best follow-up to an otherwise good IPO.
The stock appropriately trades under the ticker DNUT.
Like Oatly, Krispy Kreme has exhibited good top-line growth in recent times. Over the last five-years revenue has gone from $556 million to $1.12 billion; while global access points for the chain’s delicious donuts has snowballed from 5,720 to 8,725.
Krispy also has maintained another trend gripping many hot-topic companies: not making money. Between FY18 and FY20 the company cumulatively lost about $107 million. In 2020 the company reported a widened net loss of $60.9 million -- which according to management was driven by Covid and changes to receivables and inventory balances.
At least the company reported adjusted earnings (EBITDA) of $152.8 million last year.
The IPO market is a good example of where investors can get caught up in the emotion and make the mistake of not taking profit when prices go overboard. At Jaaims, our automated trading takes the emotion out of investment and updates recommendations every 15 minutes so you have the best chance to take profit before it’s too late.
So far we’ve been pretty successful at what we do: Since inception our Smart Portfolio^ has returned 26.53% and our Model Portfolio^^ has gained 14.70%.
Click here to discover what’s driving that performance here or learn more about our pricing model here.
^Smart Portfolio Methodology
All returns are net of fees and in AUD. Calculations are based on our monthly Professional subscription using our smart portfolio trading all stocks in markets covered by Jaaims with a portfolio of $1m, position size of $10,000 per trade and a broker fee of $9 per trade ($18 completed trade). The calculation is from 1 July 2020 to 31 March 2021 and is a period return. Distributions are reinvested, after ongoing fees and expenses but excluding taxation. Actual performance will vary depending on broker selection, position size and stocks selected by the user. Past performance is not a reliable indicator of future performance and will be subject to investment risk as returns are derived from share markets.
^^Model Portfolio Methodology
All returns are net of fees and in AUD. Calculations are based on our Standard subscription using our Model Portfolio with an average position size of $4,000 per trade and a broker fee of $9 per trade ($18 completed trade) which delivered a realised return of 14.70% from inception to 31 March 2021 . Distributions are reinvested, after ongoing fees and expenses but excluding taxation. Actual performance will vary depending on the users trading setup within the Jaaims application. Past performance is not a reliable indicator of future performance. Inception date is 1 July 2020.