Aug 27, 2010 10:04 AM PDT
Caribou Coffee (CBOU), a gourmet coffee chain with over 500 locations in the midwest and southeast, traded 230% more shares than average volume on Friday on news that the company is expanding its board of directors. The board appointed Philip Sanford, who has strong ties to the private equity industry, along with CEO Michael Tattersfield who joined Caribou in August from high growth athletic apparel company Lululemon.
While CBOU shares saw only a small gain on Friday, CBOU shares broke out of a long consolidation period and saw strong upward momentum in March. Relative strength indicates that this bullish trend is likely to continue as the stock has seen increased volume and recently crossed its 200 day exponential moving average. Caribou’s brew is getting hotter.
Fundamentals for Caribou are also showing value. The stock trades at $0.80 on the dollar of tangible book value, has no long term debt and over 25% of its market capitalization is cash. CEO Tattersfield has made great progress towards reducing costs and getting the company back to profitability for the first time since early 2005. Even at twice its present market value, CBOU would trade at less than a third of its $250M+ sales, making the company an enticing potential acquisition target. With two percent operating margins at a highly conservative 2x multiple plus tangible book value, CBOU shares could see 40% upside from Friday's close.
