Buy Green Mountain When Others Sell

NEW YORK ( TheStreet) -- A stock that has fallen from grace recently is Green Mountain Coffee Roasters ( GMCR). At one time back in 2011 it was so highly valued that its price-to-earnings ratio soared to 116. The P/E is now only 9.87 at a time when the market's P/E is around 15.

When I can find a stock with double-digit earnings growth projections at a P/E less than the market's that warrants a look as a value investment possibility.

The stock price is very depressed. While the market as measured by the Value Line Index is up about 17% in the past year GMCR has plunged 76% for the same period as is shown in this graph provided by Barchart:

Let's not focus on how far Green Mountain Coffee Roasters has fallen but how much the stock price might recover.

Green Mountain Coffee makes coffee and coffee supplies, selling primarily in North America. Its packaged coffee and coffee-making products are sold to retailers and used in homes and offices. It also markets under the Van Houtte, Brûlerie St. Denis, Brûlerie Mont-Royal and Orient Express brands, and its products are licensed under the Bigelow and Wolfgang Puck brands.

The company was founded in 1981 and is based in Waterbury, Vt.

Factors to consider: Barchart has a 40% technical sell signal as well as a Trend Spotter sell signal and both of these technical sell signals are beginning to weaken. At the present time the stock is below its 20-, 50- and 100-day moving averages and has fallen in price 28.72% in the past month as well as 75.94% in the past year. The Relative Strength Index is a weak 39.00% with a recent price of 22.14 which is way below its 50-day moving average of 25.29.

Fundamental factors: This former high flyer is still widely followed on Wall Street where 10 firms have assigned a total of 14 analysts to run projections on this stock. They still think revenue will grow by 43.90% this year and another 14.90% next year. Earnings are estimated to increase by 36.60% this year, 12.10% next year and continue to grow at an annual rate of 20.60% for the next five years.

In addition to a low P/E, the company has a B financial strength and maintains a great operating margin which continues to stay in the high teens. Although they recently lost the Starbucks brand they are still signing on other new specialty roasters.

Investor interest: Wall Street analysts still have four strong buy, three buy, six hold and only one sell recommendation in place. They think that investors at this price could see annual total returns in the 55% to 60% over the next five years.

Using the readers of Motley Fool as a gauge for the individual investor sentiment 1,486 readers have given the stock a 71% vote of confidence to beat the market. TheStreet rates GMCR a C stock.

Some peer comparisons: In this highly competitive market let's look at some of the smaller players in this sector.

Peets Coffee and Tea ( PEET)has been rated B- by TheStreet. With a B++ financial strength analysts think revenue will grow 9.90% next year and earnings will increase by 23.00% annually for the next five years.

Farmer Brothers Company ( FARM) has a D rating by TheStreet. The financial strength is B+ and analysts think revenue will grow by 2.70% next year but earnings are estimated to decrease by an annual rate of 19.60% over the next five years.

Coffee Holdings ( JVA) is rated C+ by TheStreet. With a financial strength of B the revenue projection is to increase by 9.50% next year and earnings should compound with increases of 16.00% annually for the next five years.

Conclusion: Green Mountain Coffee Roasters looks like a value investing opportunity at this level. The P/E is a discount to the market and the professional analysts look for double digit earnings growth for the next five years.

Barchart computes a technical support level at 21.19 and I think that when this stock price breaks above its 20-day moving average and moves off it's lower 14-day turtle channel that would be the time to jump on board. Put it on your watch lists and keep a chart like the one below handy:

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.