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Cramer: Truly Fabulous Turnaround

(Click for video linked to a searchable transcript of this Mad Money segment)

Whenever Jim Cramer does homework, he always researches the effectiveness of the management team. The Mad Money host believes the impact on the company and ultimately share price is enormous.

"But it's not easy to quantify, so it often gets short shrift on Wall Street, where the analysts prefer to focus on things they can put a number on," Cramer said.

To illustrate great management and great execution Cramer said look no further than Krispy Kreme and the leadership provided by CEO Jim Morgan.

Before Morgan, Krispy Kreme was struggling with Street skepticism created by accounting issues and commentary in which the company blamed the Atkins diet for turning its customers against donuts.

"Eventually, it became clear that Krispy Kreme had expanded way too rapidly and the stock went into free-fall," Cramer explained.

Then, in January of 2008, Krispy Kreme put Jim Morgan in the corner office.

"Morgan is a guy with extensive experience on Wall Street, including turnaround experience," Cramer said.

PNC | Photodisc | Getty Images

And as the new CEO, Morgan put Krispy Kreme on a path for prosperity by refinancing debt, adding healthier options such as oatmeal and putting a new emphasis on coffee.

Morgan also recognized the importance of human resources and in an effort to improve morale, he offered employees four additional days off between Memorial Day and Labor Day.

Because of those and other initiatives, "Krispy Kreme has gradually come roaring back," Cramer said.

The Mad Money host believes that recent earnings, reported on May 30th, confirm the strength.

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Krispy Kreme posted first-quarter sales and profit that topped expectations and it raised its outlook for the remainder of the year.

Net income in the three months to May 5 rose to $8 million, or 11 cents per share, from $6 million, or 8 cents per share, a year ago.

Excluding provisions it had taken for deferred income taxes, adjusted earnings came to 20 cents per share, beating the 16 cents expected by analysts polled by FactSet.

Revenue rose 11 percent to $120.6 million, also beating the $117 million expected by analysts.

"I recommended it at 12 bucks this past January, since then it's already roared to over $17, generating a 43% gain. But after the company's most recent quarter, I think the stock could have a lot more room to run," Cramer said.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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