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Krispy Kreme Doughnut's Sweet Comeback

The balance sheet remains strong; KKD ended the quarter with $74 million in cash and just $24 million in debt.

KKD Cash and ST Investments Chart KKD Cash and ST Investments data by YCharts

The company also raised earnings guidance for next year and is now expecting between 59 and 63 cents, up from 53 to 57 cents. The company ended the quarter with a total of 773 stores, 532 of which are international.

Management believes that there's more growth on the horizon, projecting a total of 1,300 stores (900 international, 400 domestic) by January 2017.

Clearly, this is a new and improved Krispy Kreme, a far cry from the company that nearly imploded years ago. The stock is now trading at about 24 times 2015 consensus estimates, which may appear a bit rich, but perhaps not if the company can deliver on its growth plans.

And therein lies the conundrum for the value investor who buys turnaround stories; when do the lines of growth and value cross? I've typically sold too early in such situations in the past, but I am holding onto this one at least for now.

At the time of publication, Heller was long KKD.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.
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