Is Dunkin’ Brands Undervalued?

DNKN: Dunkin' Brands Group logo
Dunkin' Brands Group

No, Dunkin’ Brands’ (NASDAQ:DNKN) doesn’t look undervalued. As per Trefis, the price estimate of Dunkin’ Brands’ stock is $74, which is similar to its current market price.

Dunkin’ Brands is one of the world’s leading franchisors of quick service restaurants (“QSRs”) serving hot and cold coffee and baked goods, as well as hard serve ice cream. Dunkin’ Brands Q3 2019 results are expected on 31st October 2019. Consensus expectations of Total Revenue are $359 million while earnings are expected to be around $0.81 for the quarter.

Trefis has a price estimate of $74 for Dunkin’ Brands’ stock. We have detailed the key components of Dunkin’ Brands’ Valuation in an interactive dashboard, along with our forecast for the full year 2019. In addition, here is more Consumer Discretionary data.

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#1 Estimating Dunkin’ Brands Revenues

  • Total Revenue has seen a constant increase over the years from $1.2 billion in 2016 to $1.3 billion in 2018. Trefis estimates Total revenue to reach around $1.4 billion in 2019.
  • The fall seen in Dunkin’ Donuts US revenues in 2018 is due to a change in the presentation of financial statements. Overall we see a continuous increase in the number of outlets over the years. In 2019 expected revenue is $643.9 million.
  • Dunkin’ Donuts International had a small fall in 2017 in royalty share for the segment. Post that it has been growing both in terms of outlets and average revenue per outlet. In 2019 expected revenue is $23.3 million.
  • Baskin-Robbins US segment has remained relatively flat in terms of revenues and the metrics thereof. Revenues have been in the range of $47-49 million since 2016 and is expected to be $48.7 million in 2019.
  • Baskin-Robbins International segment also has been nearly flat across the last few years. The growth in outlets and average revenue per outlet is offset by decreasing royalty share. In 2019 expected revenue is $118.7 million.

#2 Estimating Dunkin’ Brands Net Income

  • We saw a big drop in Indirect and Other expenses in 2018 due to the net tax benefit accrued as the Tax Cuts and Jobs Act was enacted which caused the Net Income to go up to $244.6 million. In 2019 we estimate the indirect and other expenses to be around $269.1 million and Net Income to be around $227.7 million. For further information regarding EBITDA margins please visit our Dashboard – Dunkin’ Brands Valuation.

#3 Deriving Dunkin’ Brands EPS Figure

  • Dunkin’ Brands has regularly invested in share repurchases to boost shareholder returns. Shares outstanding are likely to be around 76.1 million at the end of 2019.
  • This would enable it to report an EPS figure of $2.99 in 2019.

#4 Estimating Dunkin’ Brands Share Price using P/E multiple

  • We expect Dunkin’ Brands to achieve earnings of $2.99, which coupled with our P/E multiple of 24.9x works out to a price estimate of $74.



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