Barron's Bearish On Green Mountain Coffee Roasters (GMCR)

This weekend Barron's had a bearish piece on Green Mountain Coffee Roasters (Nasdaq: GMCR) because of the rise of input costs among other things. This bearish piece comes at a time when Green Mountain has risen 90% in the past year and over 600% in the past five years.

Green Mountain sells a variety of coffees through supermarkets, specialty retailers, and direct-to-consumer channels and it's the leader in the fast-growing "single-cup" market with its Keurig machines.

Although, the Green Mountain story seems good, Barron's thinks GMCR is overpriced for a few reasons outlined below.

Green Mountain's shares are priced at 56 times 2008 profits, above the 22.4 times for Starbucks (Nasdaq: SBUX) and 30.6 times for Peet's Coffee & Tea (Nasdaq: PEET), both of which have less debt.

Also, Barron's does not like that raw coffee beans accounts for the bulk of Green Mountain's cost of goods (COGS), and rapid price increases in beans recently led to the first price increase in 5 years.

Barron's also noted that some of Green Mountain's products are not priced for tough times and that's one of the reasons insiders, including Chairman Robert Stiller have sold the stock while GMCR has rallied over the past few months.

Green Mountain is trading down 4.87% in morning trading.


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