Are Peet's Coffee & Tea Shares Piping Hot Or Too Cold? (PEET)

The coffee sector has been hot recently, with Starbucks SBUX announcing a deal with Green Mountain GMCR to move into the single cup coffee market. This initially hit shares of Peet's Coffee & Tea, Inc. PEET, but shares have recovered those losses and then some, as investors flock to the $630 million purveyor of coffee. There's been speculation that Starbucks would buy Peet's, but this doesn't seem likely, as Starbucks already has Seattle's Best and Starbucks brands under its belt. Shares have performed well this year, gaining 14%, and as the market for single cup coffee gets bigger, this should benefit all coffee companies, as they try to get a slice of the pie. Peet's Coffee & Tea has not announced an initiative to get into the single cup market, but there is plenty of speculation surrounding the company, and that it will eventually the market. The company was recently upgraded at Janney Capital, further boosting the bull case in the name. The company had no debt as of the latest quarter, so the company has ample room to take on debt if needed to grow the business and open stores. Currently the company is only on the west coast of the U.S., so there is plenty of room for expansion in the country. Peet's has a better return on equity than Green Mountain, at 10.1%. Shares are not that expensive for a growth company either, trading at 25 times 2011 earnings. The stock has a price to earnings growth ratio of 1.75, which is just slightly higher than Green Mountain, but it also has more opportunity for growth than Green Mountain. Shares could probably pull back a little bit, and investors would be wise to initiate positions in the name. Shares of Peet's could potentially make your portfolio piping hot, and give you that quick pick me up your portfolio needs.