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Rocky Mountain Chocolate Factory (RMCF)
NASDAQ:RMCF
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Rocky Mountain Chocolate Factory
(NASDAQ:RMCF)
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Rating:56Neutral
Price Target:
$3.00
▲(98.68% Upside)
Action:ReiteratedDate:02/13/26
The score is held back mainly by weak financial performance (ongoing losses, negative free cash flow, and rising leverage). Offsetting this, technical momentum is strong (price above major DMAs with positive MACD), and the latest earnings call showed meaningful margin/EBITDA improvement and strengthened liquidity, though revenue remains pressured and profitability is not yet sustained.
Positive Factors
Margin Recovery
A sustained jump in manufacturing margin to 21.4% reflects structural improvements—pricing, SKU rationalization and labor efficiencies—that improve unit economics. Higher sustainable gross margins support durable profitability as volumes normalize and reduce dependence on volume-driven promotions.
Franchise Development Momentum
A growing pipeline of area development agreements and stores under construction indicates scalable franchising. Multi-unit, well-capitalized operators can expand retail footprint with limited corporate capex, enabling recurring royalty income and retail scale benefits over a multi-year horizon.
Improved Liquidity & Governance
The $2.7M capital infusion materially bolstered liquidity and reduced near-term leverage, increasing runway to execute operational changes. The transaction also added a board designee and governance provisions, strengthening oversight and reducing regulatory/compliance execution risk long-term.
Negative Factors
Negative Free Cash Flow
Persistently negative free cash flow constrains the company's ability to self-fund remodels, franchise support and digital investments. Continued reliance on external capital raises dilution and refinancing risk, limiting strategic optionality and slowing the path to sustainable, internal cash generation.
Rising Leverage and Equity Erosion
Higher debt-to-equity signals increased financial risk and reduced balance-sheet flexibility. Elevated leverage raises interest and covenant pressure, limits ability to invest opportunistically, and amplifies downside to returns if revenue recovery is slower than planned despite recent partial debt paydown.
Slow Top-Line Recovery
Management's margin-first strategy involved exiting low-margin channels, causing near-term revenue decline. Combined with a multi-year franchise roll-out, material top-line scaling is unlikely in the near term, constraining operating leverage and delaying durable revenue-driven margin expansion.
Rocky Mountain Chocolate Factory (RMCF) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$24.64M
Dividend YieldN/A
Average Volume (3M)79.13K
Price to Earnings (P/E)―
Beta (1Y)0.55
Revenue Growth8.09%
EPS Growth17.25%
CountryUS
Employees135
SectorConsumer Defensive
Sector Strength42
IndustryFood Confectioners
Share Statistics
EPS (TTM)-0.02
Shares Outstanding9,332,822
10 Day Avg. Volume50,417
30 Day Avg. Volume79,134
Financial Highlights & Ratios
PEG Ratio-0.06
Price to Book (P/B)1.61
Price to Sales (P/S)0.38
P/FCF Ratio-1.09
Enterprise Value/Market Cap1.15
Enterprise Value/Revenue0.96
Enterprise Value/Gross Profit4.56
Enterprise Value/Ebitda-12.19
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
Rocky Mountain Chocolate Factory Business Overview & Revenue Model
Company DescriptionRocky Mountain Chocolate Factory (RMCF) is a premier manufacturer and retailer of gourmet chocolates and confections, founded in 1981 in Durango, Colorado. The company specializes in handcrafted chocolates, fudge, and a variety of other sweet treats, catering to both individual consumers and wholesale clients. RMCF operates a network of franchise stores, retail locations, and e-commerce platforms, positioning itself in the specialty chocolate and confectionery sector.
How the Company Makes MoneyRocky Mountain Chocolate Factory generates revenue through multiple channels, primarily from retail sales in its franchised and corporate-owned stores, where customers purchase a wide range of chocolate products. The company also earns significant income from wholesale distribution, supplying chocolate and confections to various retailers and food service companies. E-commerce sales through its online store add another revenue stream, allowing direct access to consumers nationwide. Additionally, RMCF benefits from strategic partnerships with other businesses, including co-branding opportunities and seasonal promotions, which enhance brand visibility and sales. Overall, their diversified revenue model, encompassing retail, wholesale, and online sales, contributes to the company's financial performance.
Rocky Mountain Chocolate Factory Earnings Call Summary
Earnings Call Date:Jan 13, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:May 28, 2026
Earnings Call Sentiment Positive
The call emphasized a clear margin-first transformation showing measurable progress: gross profit doubled, gross manufacturing margin improved materially to 21.4%, EBITDA turned positive, expenses declined, and a $2.7M equity raise improved liquidity. Operational and digital investments (POS, unique store sites, DoorDash integration) and franchise momentum (34 area development agreements, 2 stores under construction) support a path to long-term growth. Near-term headwinds include an intentional revenue decline (~5.1%) from exiting low-margin channels, ongoing production transition inefficiencies, higher material/freight costs, and a multi-year timeline for meaningful store-driven top-line growth. Overall, the positives (margin recovery, cost reductions, EBITDA improvement, capitalization) substantially outweigh the near-term revenue and operational challenges.Q3-2026 Updates
Positive Updates
Improved Gross Profit and Margin
Total product and retail gross profit increased to $1.4M in 2026Q3 from $0.7M a year earlier (+100%), driven by pricing actions, improved product mix, and labor efficiencies. Gross manufacturing margin improved to 21.4% (vs. 10% a year ago and -0.6% in the prior quarter), representing an increase of 11.4 percentage points year-over-year and ~22 percentage points vs. the previous quarter.
Turnaround to Positive EBITDA and Reduced Net Loss
EBITDA was $400K in 2026Q3 versus negative $400K in the prior-year quarter (an $800K swing). Net loss narrowed to $200K (‑$0.02 per share) from a $800K loss (‑$0.11 per share) a year ago, a 75% reduction in the quarterly net loss.
Cost Structure Improvements
Total costs and expenses decreased to $7.5M from $8.6M year-over-year (down $1.1M, approx. -12.8%). Actions include SKU rationalization (elimination of hundreds of low-contributing SKUs), removal of temporary labor, large reductions in overtime, improved production scheduling, and the addition of a second production shift. Management estimates an additional $500K–$1,000K of savings available in the current cost structure.
Strengthened Balance Sheet via Equity Raise
Subsequent to quarter-end the company completed a $2.7M equity capital raise, used to pay down $1.2M of debt and retain $1.5M in working capital, providing greater flexibility to invest in operations, franchise development, and technology initiatives.
Franchise Development Momentum
Company reported 34 stores under area development agreements and 2 new stores currently under construction, reflecting growing interest from multi-unit and well-capitalized operators. Management highlighted focus on quality partners and expects build-outs to be completed over a 4–5 year timeframe.
Operational & Digital Enhancements
Technology and e-commerce progress includes DoorDash white-labeled storefronts live (zero-commission model for franchisees), unique store websites created for 100% of domestic locations, 120 stores live on the new POS system (improving data visibility), ongoing ERP customization, and loyalty program development and rollout plans.
Input Cost Tailwind and Hedging
Company expects reduced input costs following near-term cocoa developments: elimination of an approximate 10% cocoa tariff and lower cocoa futures (management locked in ~20% of expected annual consumption at favorable recent prices), which should provide margin tailwinds as chocolate costs normalize.
Encouraging Store-Level Performance
Selected company-owned and newer stores show strong trends: Corpus Christi remodel produced consistent growth with several days exceeding $4,000 in daily sales (benchmark for a $1M location is $2,800/day). New Chicago and Charleston stores meeting or exceeding expectations with favorable daily sales trends.
Negative Updates
Year-over-Year Revenue Decline
Total revenue declined to $7.5M from $7.9M year-over-year, a drop of approximately -5.1%. Management attributes the decline to an intentional exit from low- or negative-margin special and wholesale revenue streams as part of a margin-first strategy.
Modest Net Loss and Near-Term Profit Pressure
Although losses narrowed, the company still reported a net loss of $200K for the quarter. Management notes near-term revenue pressure from exiting low-margin channels and ongoing production transition inefficiencies that limited immediate profitability.
Persisting Operational Inefficiencies and Input/Logistics Headwinds
The company cited short-term operational inefficiencies related to higher material and freight costs and production transition challenges. These factors partially offset gross profit gains this quarter and remain areas to optimize.
Franchise Revenue Lags Short-Term Top-Line Growth
New franchise and area development agreements are expected to roll out on a measured multi-year basis (stores generally start within 3–4 years and complete within 4–5 years). Management cautioned that significant top-line impact from new units is not expected in 2026, making near-term revenue growth modest.
Selective Store Rationalization and Brand Risk
Company is allowing underperforming locations to close to protect brand image and improve average unit performance, which can reduce near-term store counts and revenue even as it supports long-term quality; this contributes to near-term top-line drag.
Disclosure and Visibility Gaps
Management declined to disclose the percentage breakdown of raw materials that are chocolate/cocoa, limiting granularity for modeling raw-material sensitivity despite commentary on cocoa price hedging and input-cost improvements.
Company Guidance
The company guided a margin-first path to profitability, reporting Q3 FY2026 revenue of $7.5M (vs. $7.9M prior year) with total product and retail gross profit of $1.4M (vs. $700K), a gross manufacturing margin of 21.4% (vs. 10% prior year and -0.6% last quarter), total costs and expenses down to $7.5M (from $8.6M), net loss of $200K (‑$0.02/share) vs. a $800K loss (‑$0.11/share) prior year, and EBITDA of $400K vs. negative $400K; operational targets include over 250 franchised/licensed locations, two stores under construction and 34 stores under area development agreements (4–5 year buildouts with initial stores within the first year), a lease-to-open cadence of ~6 months (lease process 2–4 months), a $2,800/day benchmark for $1M AUV (company store noted daily sales >$4,000), average stores per franchisee up from 1.34 to 1.39, SKU rationalization eliminating hundreds of SKUs with an expected $500K–$1M of additional savings, 120 stores live on the new POS, unique websites for 100% of domestic locations and DoorDash storefronts live, remodels starting after March 1 with the majority by Oct 2026 and virtually all within 24 months, nearly 20% of annual chocolate consumption hedged at favorable prices after the removal of an ~10% cocoa tariff (cocoa futures ~ $5,100/ton), and a post-quarter $2.7M equity raise used to pay down $1.2M debt and retain $1.5M working capital — all intended to drive margin expansion, higher AUVs, and a return to positive cash flow over the coming quarters.Rocky Mountain Chocolate Factory Financial Statement Overview
Summary
Financials remain stressed: the company is still loss-making (TTM net loss about $4.0M), free cash flow is materially negative (TTM about -$2.1M), and leverage has increased (debt-to-equity ~1.54 as equity declined). A partial positive is improving TTM gross margin and reduced cash burn versus the latest annual trough, but overall profitability and cash generation are still weak.Income Statement
Profitability remains weak: the company is loss-making across all provided periods, including TTM (Trailing-Twelve-Months) with a net loss of about $4.0M and negative operating profitability. While TTM gross margin improved versus the most recent annual period (roughly 21% vs ~11%), it is still well below earlier years (mid-to-high 20%+ in 2022–2023), indicating ongoing cost/price pressure. Revenue has been volatile, and the TTM shows a sharp contraction in the provided growth figure, reinforcing a challenged top-line backdrop.18
Very Negative
Balance Sheet
Leverage has risen meaningfully: total debt increased to ~$9.2M in TTM (Trailing-Twelve-Months) while equity declined to ~$6.0M, driving debt-to-equity up to ~1.54 (vs ~0.28 in 2024). Returns to shareholders are deeply negative (TTM return on equity around -62%), reflecting sustained losses and shrinking equity cushion. The balance sheet is not distressed based on assets (~$20.7M), but the trend in leverage and equity erosion increases financial risk.34
Negative
Cash Flow
Cash generation is a key concern. TTM (Trailing-Twelve-Months) operating cash flow is slightly negative (~-$0.2M) and free cash flow is materially negative (~-$2.1M), following very large cash burn in the latest annual period (operating cash flow about -$6.6M; free cash flow about -$10.4M). While the magnitude of burn appears to have improved versus that unusually weak year, cash flow remains negative overall, limiting flexibility and increasing reliance on financing or balance-sheet resources.16
Very Negative
| Breakdown | TTM | May 2025 | Feb 2024 | Feb 2023 | Feb 2022 | May 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 29.64M | 29.58M | 27.95M | 30.43M | 29.49M | 21.76M |
| Gross Profit | 6.21M | 3.25M | 4.71M | 8.15M | 8.96M | 4.52M |
| EBITDA | -2.32M | -4.72M | -3.94M | -4.10M | 223.65K | -282.87K |
| Net Income | -4.04M | -6.12M | -4.17M | -5.68M | -341.70K | -899.78K |
Balance Sheet | ||||||
| Total Assets | 20.73M | 21.18M | 20.58M | 21.99M | 26.88M | 24.95M |
| Cash, Cash Equivalents and Short-Term Investments | 641.00K | 720.00K | 2.08M | 4.72M | 7.59M | 5.63M |
| Total Debt | 9.22M | 7.21M | 2.94M | 2.39M | 1.81M | 1.96M |
| Total Liabilities | 14.72M | 14.20M | 9.94M | 7.62M | 7.48M | 5.98M |
| Stockholders Equity | 6.01M | 6.97M | 10.64M | 14.37M | 19.40M | 18.97M |
Cash Flow | ||||||
| Free Cash Flow | -2.06M | -10.36M | -5.45M | -3.10M | 1.92M | -181.22K |
| Operating Cash Flow | -184.00K | -6.59M | -2.44M | -2.10M | 2.86M | 67.35K |
| Investing Cash Flow | -2.01M | -1.66M | -1.45M | -767.82K | -605.00K | -70.99K |
| Financing Cash Flow | 1.75M | 6.89M | 1.25M | 0.00 | -299.06K | 814.86K |
Rocky Mountain Chocolate Factory Technical Analysis
Positive
1.51
Price Trends
2.11
Positive
1.88
Positive
1.68
Positive
Market Momentum
0.16
Positive
55.75
Neutral
38.88
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RMCF, the sentiment is Positive. The current price of 1.51 is below the 20-day moving average (MA) of 2.51, below the 50-day MA of 2.11, and below the 200-day MA of 1.68, indicating a bullish trend. The MACD of 0.16 indicates Positive momentum. The RSI at 55.75 is Neutral, neither overbought nor oversold. The STOCH value of 38.88 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for RMCF.
Rocky Mountain Chocolate Factory Risk Analysis
Rocky Mountain Chocolate Factory disclosed 32 risk factors in its most recent earnings report. Rocky Mountain Chocolate Factory reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Rocky Mountain Chocolate Factory Peers Comparison
UnderperformOutperform
Sector (62)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
68 Neutral | $45.01B | 51.12 | 18.89% | 3.00% | 4.71% | -23.03% | |
66 Neutral | $2.83B | 32.36 | 10.48% | 0.95% | 0.34% | 0.85% | |
63 Neutral | $77.01B | 31.82 | 9.29% | 3.53% | 4.13% | -5.19% | |
62 Neutral | $20.33B | 14.63 | -3.31% | 3.23% | 1.93% | -12.26% | |
56 Neutral | $24.64M | -4.89 | -56.79% | ― | 8.09% | 17.25% | |
46 Neutral | $513.90M | -1.00 | -55.07% | 3.34% | -10.40% | -1904.10% |
* Consumer Defensive Sector Average
RMCF
Rocky Mountain Chocolate Factory
2.55
1.00
64.52%
HSY
The Hershey Company
221.77
49.23
28.53%
TR
Tootsie Roll
41.51
11.53
38.46%
MDLZ
Mondelez International
58.80
-5.14
-8.04%
DNUT
Krispy Kreme
3.03
-6.03
-66.54%
Rocky Mountain Chocolate Factory Corporate Events
Executive/Board ChangesPrivate Placements and FinancingRegulatory Filings and Compliance
Rocky Mountain Chocolate boosts capital and board governance
Positive
Dec 19, 2025
On December 18, 2025, Rocky Mountain Chocolate Factory completed a $2.7 million private placement of 1.5 million common shares at $1.80 each to ARM-D Rocky Mountain Chocolate Holdings, with proceeds earmarked for general working capital. In connection with the deal, the company granted the investor resale registration and preemptive rights, imposed standstill and 25% ownership caps on both the new investor and existing holder Global Value Investment Corporation, and added investor designee Alberto Pérez-Jácome Friscione to its board and key committees, a move the company believes cures any potential Nasdaq board-composition non-compliance and strengthens its governance and capital structure.
The most recent analyst rating on (RMCF) stock is a Hold with a $1.50 price target. To see the full list of analyst forecasts on Rocky Mountain Chocolate Factory stock, see the RMCF Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.