Starbucks SBUX
What does Starbucks do?
Starbucks is a globally active roaster, marketer and retailer of coffee. The company operates cafés that sell coffee, tea and other beverages as well as baked goods, breakfast snacks and small meals. It also offers roasted coffee in whole bean and ground form, capsules and ready-to-drink beverages. Its brands include Teavana, Seattle's Best Coffee, Ethos and Starbucks Reserve in addition to Starbucks Coffee.
The business is divided into the North America, International and Channel Development segments. The first two include revenue from company-operated stores and licensed stores, where partners operate cafés under the brand and license fees and product sales generate revenue. Channel Development distributes products through grocery retail and foodservice customers. In competition, Starbucks positions itself as a premium brand with high brand awareness, a broad store network, a digital loyalty program and a strong presence in mobile ordering, but it competes with quick-service restaurants, coffee chains and independent cafés.
Score profile
Rank vs. Restaurants (25 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Starbucks ranks in the middle in the group Restaurants (4.8/10). On growth, the company ranks in the middle in the group Restaurants (5.0/10). On valuation (higher = cheaper), the stock ranks below average in the group Restaurants (3.9/10). On financial strength, Starbucks ranks in the middle in the group Restaurants (5.7/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 29.5x | 20.7x | better than 27 % |
| Trailing P/E | 49.8x | 26.0x | better than 16 % |
| PEG ratio | 1.1x | 1.6x | better than 88 % |
| EV/EBITDA | 25.0x | 16.4x | better than 15 % |
| Price/sales | 3.3x | 1.9x | better than 26 % |
| Revenue growth | -4.5% | 3.9% | better than 6 % |
| Earnings growth | 405.4% | 8.8% | better than 94 % |
| Gross margin | 22.4% | 26.7% | better than 38 % |
| Operating margin | 12.8% | 9.8% | better than 66 % |
| Net margin | 6.7% | 5.1% | better than 62 % |
| Return on equity | 0.0% | 8.0% | better than 24 % |
| Debt/equity | 0.0% | 86.3% | better than 83 % |
| Current ratio | 0.8x | 0.8x | better than 50 % |
| Free cash flow yield | 2.5% | 3.0% | better than 38 % |
| Dividend yield | 2.3% | 2.3% | – |
| Payout ratio | 142.8% | 51.3% | – |
| Beta | 1.01 | 1.16 | – |
Valuation: what is Starbucks worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Starbucks a model range of 50.58 USD to 77.15 USD per share.
30 analysts, average rating “Buy”, average price target 111.07 USD (+1.0%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Revenue depends significantly on customer traffic and average ticket in the stores, especially in the beverage business.
- Brand strength and the digital loyalty program encourage repeat purchases and stabilize customer retention.
- Expansion of the store network, particularly internationally and through licensed partners, extends the brand's reach.
Risks
- Fluctuating prices for coffee beans, milk and other commodities weigh on margin if they cannot be passed on.
- As a cyclical consumer stock, the company is sensitive to weakening consumer sentiment and declining purchasing power among customers.
- High labor and rent costs as well as strong competition limit profitability and pricing power.
What to look for with Starbucks
Comparable store sales growth is informative because it shows traffic and ticket independent of new openings and thus reflects organic demand.