Iconic, adored, and sometimes vilified, donut chain Krispy Kreme made its return to the public markets this summer, after 5 years in private hands.

The company priced its initial public offering at $17 per share, well below its planned range of $21 to $24, and even opened lower. Shares quickly rebounded to the lower end of its targeted range and the offering gave the firm $500 million of fresh cash injection and an implied valuation of $2.7 billion. Now under the ticker “DNUT”, the firm that also owns Insomnia Cookies is without pure play competitors in the equity market as Dunkin and Tim Hortons are private.

We looked at the financial statements provided with the S-1 filing and analyzed analysts estimates and peers to evaluate the valuation against our methods.

Absent a turnaround that would bring Krispy Kreme’s margins in line in the upper double digits of other fast food chains (including fellow breakfast heavy-hitters Starbucks, IHOP, and Dennys), it remains challenging to justify much optimism in the valuation, even though its top line growth has been stellar.

Market cap: $2.7bn
Weekly valuation Krispy Kreme DCF valuation (assuming margin improvement towards industry median): $942 million

Weekly valuations: Krispy Kreme link to the valuation here

Other recent valuations: Peloton | Morrisons | Aldi

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