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Don't Buy Dunkin' Donuts IPO: Value Analyst

(Dunkin Donuts IPO article updates an earlier version.)
CANTON, Mass. (TheStreet) -- Dunkin' Donuts owner Dunkin' Brands is set to begin trading publicly on Wednesday and the IPO could fetch as much as $20 per share, but value investors may do better to look elsewhere for growth, according to one analyst.

"You rarely get a good deal in an IPO and seldom get good value," BGB Securities analyst Sam Yake told TheStreet. "I would rather look where no one else is looking for value."

Yake said at the intended range of $16 to $18 a share, the Dunkin' Donuts IPO is expensive, though he believed the offering will be successful because of the company's completely franchised business model. He conceded that the company 's capital needs "are almost nothing," and that it has a lot of growth potential considering its lack of stores west of the Mississippi River.


"But how much it's worth and how much investors are willing to pay for it" will be up to individual investors, he said. It could be considered cheap for those who view Dunkin' Donuts' growth potential on par with restaurant gems like Chipotle Mexican Grill (CMG), Panera Bread (PNRA) or Buffalo Wild Wings (BWLD), Yake added, but as a value investor the analyst prefers other names which he says have "superior growth prospects."

Chief among them: AFC Enterprises (AFCE). Yake said the operator of Popeye's fast-food chicken restaurants can be bought at "much cheaper multiples than Dunkin' Donuts," though he maintained that he does not absolutely think Dunkin' Donuts is a bad investment at the expected IPO price.


"Investors may be right to pay [for pricey multiples of Chipotle, Panera or Buffalo Wild] because they're great companies, but I tend to be more a value investor," Yake said.

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