Is Keurig Green Mountain an Attractive Investment?

With shares of Keurig Green Mountain (NASDAQ:GMCR) trading around $119, is GMCR an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Keurig Green Mountain is engaged in the specialty coffee and coffee maker businesses. The company roasts Arabica bean coffees including single-origin, Fair Trade Certified, certified organic, flavored, limited edition, and blends offered in K-Cup portion packs, and whole bean and ground coffee selections. It also offers other specialty beverages, including tea, hot apple cider, and hot cocoa also offered in K-Cup portion packs. The coffee and relative drink trend has been exploding over recent years. Keurig Green Mountain makes this trend as personal as possible by bringing favorite beverages to the comfort of homes and businesses. As the specialty and related beverage trend operates in full force, look for companies like Keurig Green Mountain to see rising profits.

Shares of Keurig Green Mountain are going crazy again. In afternoon trade the stock is up more than 5 percent on no news. This is the second time in a week the stock has risen sharply, rising more than 8 percent into the close last Friday. That move had traders scratching their heads. Risk Reversal‘s Dan Nathan told CNBC on Monday that Friday’s action was curious, and said that it became a situation where “buying begets buying.” On Monday, Keurig Green Mountain announced an agreement with Subway to bring the company’s Keurig single-cup coffee brewers to Subway restaurants in North America. A nice partnership for the company, but not the kind of deal that drives a stock up 8 percent. Keurig Green Mountain has been one of the most controversial stocks in the market, and in the past has been a short idea of hedge fund manager David Einhorn.

T = Technicals on the Stock Chart are Strong

Keurig Green Mountain stock has been moving higher over the last couple of months. The stock is currently trading near all time highs and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Keurig Green Mountain is trading above its rising key averages which signal neutral to bullish price action in the near-term.


Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Keurig Green Mountain options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Keurig Green Mountain options




What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options



August Options



As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Keurig Green Mountain’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Keurig Green Mountain look like and more importantly, how did the markets like these numbers?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





Keurig Green Mountain has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with Keurig Green Mountain’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Keurig Green Mountain stock done relative to its peers, Starbucks (NASDAQ:SBUX), McDonald’s (NYSE:MCD), Dunkin’ Brands (NASDAQ:DNKN), and sector?

Keurig Green Mountain



Dunkin’ Brands


Year-to-Date Return






Keurig Green Mountain has been a relative performance leader, year-to-date.


Keurig Green Mountain provides coffee and related products to eager consumers around the world. In afternoon trade the stock is up more than 5 percent on no news. The stock has been moving higher over the last couple of months and is currently trading near all time highs. Over the last four quarters, earnings and revenue figures have been on the rise, which has pleased investors in the company. Relative to its peers and sector, Keurig Green Mountain has been a year-to-date performance leader. Look for Keurig Green Mountain to continue to OUTPERFORM.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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