JDE Peet’s: Busted IPO of Market-Leading Pure-Play Coffee Roaster

Adam Crocker of Logbook Investments presented his investment thesis on JDE Peet’s (Netherlands: JDEP) at European Investing Summit 2021.

Thesis summary:

JDE Peet’s is the world’s largest pure play coffee roaster and #2 in global CPG coffee market share, with dominant presence in Europe and attractive growth in the rest of the world. Notable brands include Peet’s, Jacobs, L’Or, Stumptown, and Intelligentsia.

Since the company’s IPO in May 2020, the shares have traded down due to concerns about near-term margins and growth under a new CEO. The recent valuation of 13.5x EV/EBIT overlooks the company and industry’s consistent growth and sustainably impressive margins over decades (peers historically trade in the high teens or above).

As JDE Peet’s delivers on its mid-single digit revenue goals, fueled by industry volume growth and a trend toward premiumization in coffee, trading multiples are likely to recover toward historical levels. Longer-term, as leverage is reduced below the 2.5x target, potential exists for growth-enhancing M&A.

JDEP offers an opportunity to own a quality business below market multiples.

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About the instructor:

Adam Crocker, CFA is Founder and Chief Investment Officer of Logbook Investments, a value fund with core positions based on insights from books. Logbook launched in 2016 and is seeded by his former employer. Prior to Logbook, Adam was a co-manager at Metropolitan Capital Advisors, a long/short equity fund founded in 1992. Before joining Metropolitan, he was an analyst at Morgan Stanley Investment Management conducting research on behalf of growth and value investment teams. He began his career in Leveraged Finance investment banking at JPMorgan. Adam is a 2005 graduate of the Value Investing Program at Columbia Business School and has an undergraduate degree in Economics from Columbia University.

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