Breaking the Caffeine Habit

Even at half-price, Green Mountain's stock will give you the jitters.

For years, investors seemed as addicted to Green Mountain Coffee Roasters (symbol GMCR) as customers were to its joe. From a split-adjusted low of $2.80 in 2006, the stock soared to $116 before peaking last summer. But the price has been sliced in half since hedge-fund manager David Einhorn publicly made a case against the stock. His reservations: Growth opportunities are limited; the expiration of patents will eat into its lucrative K-Cup business; and the firm's financial results aren't trustworthy. But have investors overreacted, and is the stock of this still very profitable company now a buy?

Green Mountain sells single-cup coffee makers and individual packets of coffee known as K-Cups, as well as roasted coffee. Profits took off after the firm bought Keurig, a maker of single-cup brewers, in 2006. Green Mountain, which earned $8.4 million, or 7 cents per share, in the fiscal year that ended September 2006, made $249 million, or $1.31 per share, in the year that ended last September.

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Jennifer Schonberger
Staff Writer, Kiplinger's Personal Finance