nottheSEC (72.43)

The case againt Rocky Mountain Chocolate Company. With all due respect.

September 02, 2009 – Comments (0) | RELATED TICKERS: RMCF

Positive: active CEO & Founder with large stake in the company

 IMHO yeah the fundies look good and the founder and CEO owns like 11%. Incidentally the founder was trying to open a SEE'S but they did not franchise. 

Positive: Good marketing moves to establish niche

 Co-branding with Cold Stone creamery is genius. Thinking about smaller stores in smaller town venues is also great because Godiva or Lindt will not go there as "aspirational brands'

Positive: Expansion outside the US 

Negative: the stock volume is low 

Negative: To me too much risk not enough reward

1)If we have a correction this stock has no reason to beat it. At $5 and a PE at about 6-7 AND the dividend at current levels then I am buying. Personally though at $7.50-8 a pop and a PE of 15 it's risky for a non-moat 40-45 million microcap.

2) According to MSN earnings growth in the past year has decelerated rapidly compared to earnings growth in the past three years. They rate it a 4/10. 

Negative: US expansion plans not good 

Now have just 2 more franchises in the US than they did in 2006.

Negative: 75 % of owners own more than 1 franchise . If these owners lose their business because of the recession multiple locations will close. 

Negative:  Their main business are tied ito malls(consider the REITS that run malls stability and the consumer) and tourist spots(that has been on the decline most places)

Negative: Identify themselves as confectioners not chocolatiers. The later is better but may indicate they know they cannot compete with Godiva or Lindt.

Conclusion: Too much risk not enough reward. Too many better stock candidates or the sidelines may be a better option for any consumer driven discretionaty. Would buy at $5 with dividend with reservations that it may be a value trap at PE of 6/7.