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Donuts Rise From the Ashes

Stocks in this article: KKD SBUX

NEW YORK ( TheStreet) -- Yesterday was a big day for Krispy Kreme (KKD), and not just because the stock ended the day up 5.5%, or because the company announced that it has entered an agreement for 10 franchises in Taiwan.

Yesterday, the stock hit an eight-and-a-half-year high, and is now in territory it has not seen since the summer of 2004. Those were heady times for this former cult stock; the wheels were beginning to come off as the company's overly aggressive expansion plans, poor management, and accounting issues converged to nearly take the company under.

This was a $40 stock in March of 2004; by August of that year, it was at $14.

KKD Chart KKD data by YCharts

It only got worse from there. The profits dried up, and between 2004 and 2009, the company closed 240 stores By early 2009, shares changed hands for just over a buck, and this once can't-miss brand appeared to be on its last legs; its rich history all but a memory. While it did not go public until 2000, the company had been founded in 1937, and had a regional cult-like following. Going public presented an opportunity to take Krispy Kreme national.

After what seemed like a great start, the company lost money for 5 consecutive years through 2009, and had to restate several years of financials. By then, investors had all but given up on the name; this was not the second coming of Starbucks (SBUX), as some might have believed. But very quietly, Krispy Kreme began to right the ship. In 2010, the company reported break-even results, and same store sales showed some signs of life.

The company was profitable in 2011 and 2012, and has been delivering better than expected results. Last quarter, same store sales rose 6.8%, and earnings per share of 12 cents a share easily beat the eight cents a share consensus estimate. The company also added 20 new stores. Interestingly though, much of the company's new found expansion is not coming from the U.S., but from international franchising.

In early December, the company opened its 500th international store, which also happened to represent its 90th location in Mexico. For perspective, consider that at the end of the third quarter, there were just 238 U.S. locations.

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