SBUX Market Research & Analysis Report
Updated Nov 13, 2015

Growth and Balance Sheet

Starbucks Corp. (SBUX) delivered another quarter of sales gains as more customers visited its stores worldwide. Starbucks otherwise reported an impressive fiscal fourth quarter — earning $652.5 million, or 43 cents, meeting analyst forecasts according to FactSet. Revenue jumped nearly 18 percent to $4.91 billion, just ahead of forecasts. The gains were made on improved traffic and spending in its stores as more people indulged on food and higher-priced drinks. Starbucks said that revenue in its stores open at least a year — considered a key indicator of financial performance — jumped 8 percent in the fourth quarter. CEO Howard Schultz said the sales gains "demonstrate the strength and relevance of the Starbucks brand around the world." The profit gains came despite increased spending on the company's digital efforts, such as its mobile order and pay service, and added spending on staff, including wage increases and education reimbursement. Starbucks earned $2.76 billion for the full year on revenue of $19.16 billion. For its current fiscal year, Starbucks expects to earn between $1.87 and $1.89 per share, in line with market forecasts of $1.88 per share. The company, which currently has more than 23,000 stores worldwide, plans to add 1,800 new stores in the 2016 fiscal year. 

Valuation

Starbucks Corp. (SBUX) P/E stands at 32.93 below the industry average of 33.55, and above the S&P 500 average of 17.45 The company is currently trading above the maximum P/E ratio of 15x, and over the last five years, the company’s shares have traded in the range of 23.40x to 34.40 trailing 12-month earnings. SBUX's current Price/Sales of 4.73 is above the average of its industry of 2.02. SBUX’s head to head comparison to its main competitors shows that the company has gross margin below the peer average, and one that is at the industry average. The achieved operating margin of the company is below the average operating margin of the selected competitors, and it is above the industry average. The quarterly revenue is above the industry average and above its main competitors. The stock is currently trading below its intrinsic value of $64.16 this suggests that the stock is undervalued at these levels. The beta of 0.76 implies lower volatility of the stock with respect to the S&P 500. SBUX has shown positive earnings consistency over the last five years. Company’s earnings have increased by 24.11% over the same period. The current quarter earnings in comparison to the same quarter last year are -10.26%. SBUX’s Total Debt/Equity of 40.35 is negative. SBUX’s current price levels are above the maximum level, is trading 4.7% below the 52 week high of $64.00, and the technical analysis give a neutral view of the stock. The majority of analyst ratings are bullish. SBUX dividend yield stands at 1.10% with payout ratio at 34.38%. 

About SBUX

Starbucks Corporation (Starbucks) is a roaster, marketer and retailer of specialty coffee in the world, operating in 62 countries. The Company purchases and roasts coffees that it sells, along with handcrafted coffee, tea and other beverages and a variety of fresh food items, through company operated stores. The Company also sells a variety of coffee and tea products and licenses its trademarks through other channels, such as licensed stores, grocery and national foodservice accounts. In addition to its flagship Starbucks brand, the Company’s portfolio also includes goods and services offered under these brands: Teavana, Tazo, Seattle’s Best Coffee, Starbucks VIA, Starbucks Refreshers, Evolution Fresh, La Boulange and Verismo. The Company operates in four segments: Americas, inclusive of the US, Canada, and Latin America; Europe, Middle East, and Africa (EMEA); China / Asia Pacific (CAP) and Channel Development.

Competitor Comparison

Starbucks Corporation (NasdaqGS: SBUX) N.V.

Highlights

The Company's stores offer an assortment of fresh food offerings. The Company offers Evolution Fresh cold-pressed juice, iced coffee, iced tea, chocolate beverages, smoothies and kids' drinks, among others. The Company offers breakfast, bakery, salads and sandwiches. The Company offers coffees, syrups and sauces online. The Company also offers food under the categories, such as under 200 calories, under 350 calories and food with 10-grams fat or less, among others. The stock closed yesterday’s trading session at $61.07. In the past year, the stock has hit a 52-week low of $38.66 and 52-week high of $64.00. SBUX has a market cap of $89.00 billion and is part of the consumer goods sector.

• Building strong customer connect through value-added services
• Leveraging technology to build a robust distribution channel strategy
• Strong financial position    

• Product recalls
• Tax evasion and lawsuits

SBUX Intrinsic Value

Stock Valuation Model & Intrinsic Value Definitions

Investors should keep an eye open for stocks that are trading within 10% of their 52-week highs, as it is likely to continue in its upward trend. SBUX's 52 week high is $64.00 current price is 61.07, is 4.7% below the 52 week high. 

The Price/Earnings (P/E) ratio, based on the greater of the current PE or the PE using average earnings over the last 3 fiscal years, must be "moderate", which in this model states is not greater than 15. Stocks with moderate P/Es are more defensive by nature. The company has a P/E ratio of 32.93 below the average industry P/E ratio of 33.55 and is above the S&P 500 P/E ratio of 17.45. 

When there is strong insider ownership which we define as 8% or more, management is more likely to act in the best interest of the company, as their interests are right in line with that of the shareholders. Insiders own 2.79% of SBUX stock. Management's representation is not large enough. This does satisfy our minimum requirement; companies that pass this test are more attractive to our valuation model

The model is using several technical indicators (MACD, RSI, MFI, OBV, position Indicators) to forecast the trend of the stock for 6 and 12 months, and assign a value.

SBUX is trading in the range of $56.54 - $64.00 in the past 30 days. The stock has been showing support at $61.00 and resistance in the $63.50 range. The stock is trading above the 50-Day Moving Average and above the 200-Day Moving Average. The RSI(14) is 43.53. Our indicators give a neutral view on SBUX. 

The financial health of the company the higher the better, we evaluate all the financial ratios of the company.

Investor’s sentiment for the stock.

The model assigns a value according to analyst’s recommendation for the stock. Analyst rating on Reuters.com is 16 Buy, 8 Outperform, 4 Hold, 0 Underperform and 0 Sell.

We are searching for EPS numbers that are better than the previous year's. One dip is allowed, but the following year's earnings should be higher than the previous year. SBUX’s annual EPS for the last 5 years were 0.62, 0.81, 0.90, 0.00, 1.36 this type of earnings action is positive. 

The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 25% or should be less than the average Debt/Equity for its industry. SBUX’s have total debt/equity ratio of 40.35 which is negative.

The EPS growth for this quarter relative to the same quarter a year earlier is above the minimum 15% that this model likes to see for a "good" growth company. Stocks with improving earnings are worthy of your extra attention. SBUX’s EPS growth for this quarter relative to the same quarter a year earlier is -10.26, below our target.

This stock valuation model looks for annual earnings growth above 12%, but prefers higher than 20%. SBUX’s annual earnings growth rate over the past five years is 24.11%, above the target growth rate.

¹Tradespoon Score and Outlook: This score conveys Tradespoon’s long-term outlook of 1 to 5 years for a particular stock. Tradespoon uses proprietary methods to rate its trading picks on a scale from 1 to 10, with a 10 being the most favorable expected risk and return outlook. To determine a stock’s rating, Tradespoon uses an advanced algorithm that factors in fundamental and technical analysis to determine a stock's expected risk and return.