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When the call went out for a special feature on cult stocks, I was the RealMoney contributor who asked, "What the heck is a cult stock?" A little slow on the uptake sometimes, I am. My first thought, on finding out what it was, was that no company says "cult stock" more than Harley Davidson ( HOG). After all, have you ever known anyone to tattoo "McDonald's ( MCD)", "Pfizer ( PFE)", or "Microsoft ( MSFT)" on a body part? Maybe you have. But, in any case, I don't want to write about motorcycles today, not when I can write about doughnuts.

And not just any doughnuts. Krispy Kreme Doughnuts ( KKD) -- a cult classic that some folks evidently even use as hamburger buns. Really. Great doughnuts, however, don't necessarily translate into a great stock. The company went public back in 2000 at $21 per share ($5.50 split adjusted) amid much fanfare, opened at $32 and rose to $37 ($9.25 split adjusted) on the first day of trading. By December of 2001, the share price had quadrupled. After topping out in December of 2003 in the $49 range, it's been pretty much all downhill since, and this former high flyer now trades around $4.00, a veritable reverse ten bagger.

Name a bad business development, and it probably happened to Krispy Kreme. Over-expansion, ridiculous over-payment to acquire stores from franchisees, poor accounting practices and controls, restatements, bad management, class-action lawsuits, declining sales and disappearing profits ... the list goes on. The losses piled up, year after year until, all but forgotten, the stock bottomed at $1.08 in February of 2009, a shadow of its former self. Talk about the near destruction of a brand; If this is not already a business-school case study, it should be.

This stock went from growth darling to near oblivion. I, for one, had forgotten about it. Krispy Kreme's presence in the area I live all but disappeared, as the company closed stores and ended relationships with supermarket chains that carried the company's product.

Prior to 2010's breakeven results, the company was in the red for five years. But now, with two consecutive positive quarters under its belt, Krispy Kreme may be making a comeback. Last quarter, revenue fell 1.4%, but that included the effects of refranchising some stores -- and were it not for that, revenue would have been up 0.4%. More importantly, net income rose 147%, and the company earned $4.5 million, or $0.07 per share. Same-store sales showed progress, rising 3.4%. The company also raised its guidance for fiscal 2011 operating income to a range of $11-$15 million from $10-$13 million.

We'll get a glimpse today of whether the progress has continued, as the company is due to report Q2 earnings today after market close. Consensus estimates are calling for a breakeven quarter on revenue of $84 million. But with just three analysts currently covering the stock, there's certainly room for a surprise, either way.

Today's Krispy Kreme is a leaner version of what it was back in the 2000s. The company closed 240 U.S. stores between 2004 and 2009, and has a greater presence internationally. As of January, the company had 224 U.S. and 358 international locations. Of the total 582 stores, 499 are franchised. This company will probably not become the next Dunkin' Donuts, but with a solid brand name and a history that dates back to 1937, there's no reason it can't thrive, especially if management doesn't repeat the mistakes of the recent past.

Finally, Krispy Kreme has done a good job of cleaning up its balance sheet over the years. As of last quarter, cash stood at $20.1 million and debt at $43.2 million, $42.5 million of it long term. From an asset perspective, the company owns the land and buildings for 42 locations, the building in 23 locations, plus two facilities in Winston Salem, North Carolina, with a total of 250,000 square feet. The total package has a current market cap of $278 million and an enterprise value of $301 million. This might ultimately make a nice acquisition candidate for someone looking to further build their brand portfolio. You never know.
At the time of publication, Heller was long KKD.

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.