SBUX Fundamental Research Investment Analysis, Starbucks Corp.

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Starbucks Corporation (SBUX)

The Razor's Edge

2-Year Price History

Recent Price
(3/3/2009 11:17 AM)
$8.64
52-Week Price
$7.06 - $18.89
Market Capitalization
$6.4 Billion
Dividend Yield
0.00%
Most Recent Dividend
$0.00

About Starbucks Corp.

Starbucks Corporation is considered to operate in the Services sector. They specifically operate in the Specialty Eateries business segment contained within the Leisure industry.

The Company with its subsidiaries purchases and roasts whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, a variety of complementary food items etc.

Ockham's Rating

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SBUX Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, SBUX the high and low end of the Price to Sales per share ratios are 2.21x and 1.34x respectively.

Notice that SBUX's current Price to Sales per share ratio is 0.60x, which is quite a bit below what we consider a normal Price to Sales ratio for this stock. Given normal conditions and a price of $9.15, SBUX is 67% below where we would expect to see it. This will beneficially factor into our final analysis of SBUX as it is not often that this stock sinks to these levels.

SBUX Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. SBUX is significantly below their historical average multiples of Cash Earnings, as calculated by our proprietary analysis. It is incredibly important to understand that for SBUX, the current level of Cash Earnings compared to its historical levels helps identify where SBUX is in relation to what the investing community was willing to pay for this level of Cash Earnings in the past. With a historical high Cash Earnings per share ratio of 18.02 and a historical low Cash Earnings per share ratio of 10.77, an investor can relate where value becomes optimal.

So what does "significantly below" mean when we talk about Price to Cash Earnings numbers for SBUX? From the Ockham perspective, we are looking specifically at SBUX to see if the market is recognizing the huge disparity between SBUX's past stock price to Cash Earnings ratio to today's levels. At a difference of 64% below the average historical Price to Cash Earnings ratio, our view would be quite positive at this point. However, as with all metrics, we need to also take other factors into account when looking at SBUX. While we view better Cash Earnings metrics as very important, if the market is slow to identify this value, or if Cash Earnings were to fall from these levels, we would become more neutral in our stance.

SBUX Dividends

When determining a company's future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn't imperative for SBUX to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis. As far as our investing methodology goes, it is not necessary to pay a dividend in order to get a favorable rating, so as for right now SBUX gets a neutral rating for the dividend portion of the model. The company is not currently paying a dividend nor have they in the fairly recent past.

Peer Comparison

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Starbucks Corp. Industry Grouping

(3/2/2009)
Company Ticker Market Cap (Ml) Latest
Price
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
5-Yr.
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not incuding SBUX) 6.70 6.13 » 34.81 0.21 0.29 » 5.29 24.80% 42.79%
*10 year range does not include current year values
Starbucks Corp. SBUX $6.4 Billion $8.77 5.20 10.66 » 36.48 0.60 0.94 » 3.93 20.57% 21.54%
Marriott International, Inc. Shares- A MAR $4.6 Billion $13.26 5.53 7.52 » 26.87 0.37 0.32 » 1.55 7.40% 27.50%
Tim Hortons Inc. THI $4.2 Billion $23.30 11.63 9.87 » 22.15 0.00 0.00 » 0.00 n/a 139.45%
Carnival PLC ADS CUK $4.1 Billion $19.04 1.20 3.60 » 86.59 0.20 0.88 » 23.71 59.70% 12.38%
Darden Restaurants, Inc. DRI $3.5 Billion $25.72 5.04 2.58 » 16.34 0.48 0.25 » 1.18 7.32% 22.82%
Burger King Holdings, Inc. BKC $2.9 Billion $21.55 10.09 7.06 » 22.09 0.00 0.00 » 0.00 n/a 11.82%
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RazorWire™ & Community Discussion

The Call
2/25/2009 11:29 AM
The Call
We're in a break as ben bernanke is on capitol hill for the second day of his testimony. They are taking a break right we will go back to that live -- >> did he go out for STARBUCKS? >> I think that's what happened. Maybe decaf because it's been a stressful time here. The dow right now is off by 125 that's about 1.7%.
Mad Money
2/20/2009 6:41 PM
Mad Money
Mad Money
>> caller: a big boo-yah from maui. >> whoa! Excellent. >> I want to know what's going on with star buck. >> SBUX. It does look like it is bottoming. It is really hard to call a turn in these games. I have to wait and see. Not enough time to come back. Mcdonald's took 18 months before
Fast Money
2/20/2009 5:33 PM
Fast Money
Fast Money
The buckle to go phenomenal. And take a look at green mountain coffee. It is doing grateful they make those little cups that you see? Office when's people aren't going out for STARBUCKS. Green mountain coffee surging >> are you a big green mountain coffee? >> I don't drink coffee, believe it or not. >> home depot. Take a look at that balance
Closing Bell
2/20/2009 4:52 PM
Closing Bell
Hurt despite star buck' increasing focus on breakfast foods. Although star buck' pairing of warm sandwiches and coffee on its menu is a good idea, the format of STARBUCKS' stores makes it tough to produce food the oscars night is not just the biggest night. It is one of the biggest annual events for advertisers, second
America's Nightly Scoreboard
2/19/2009 7:46 PM
America's Nightly Scoreboard
America's Nightly Scoreboard
Achiever after looking at this list. David: number 5, give water. >> let's start at my alma matre, penn, fighting quakers. This is a great company, probably in STARBUCKS, you've seen ethos water, they give a nickel for charity. This company gives a dime for charity every bottle you buy. They're color-coded and correspond to different
Closing Bell
2/19/2009 4:58 PM
Closing Bell
Out to 14,000 stores by the they're taking the advantage of the trend-setting crowd to take on STARBUCKS by rolling out their new cops. Some unlikely partnerships and opportunities here at fashion >> thanks so much. Margaret brennan in new york city. >>> well, it was another rough stocks today.
Squawk Box
2/19/2009 8:38 AM
Squawk Box
Squawk Box
You're going to zero, rick, on a >> you know, it's amazing that it's only 8:30, and santelli is in fifth gear. You got to make it through the whole day, man. Start pacing yourself. >> that's all right. STARBUCKS already has the i'm ready to go. >> I vote for him. I vote for him. >> rick, steve, thanks, guys. Jim 11:30 eastern, and it's right
Countdown to the Closing Bell
2/18/2009 3:03 PM
Countdown to the Closing Bell
Fallen 30% in the month of january. Food and clothing names in focus not great numbers coming out of some food and drink names STARBUCKS getting hit by comments that its new one dollar coffee offering is minimally positive, at best. We have fassel and decker
Money For Breakfast
2/18/2009 8:47 AM
Money For Breakfast
And we'll begin franchising business. That will give us another company in a different way, and also offset some of the issues or the burden that people see in terms of STARBUCKS company on stores. However, we have an impeccable balance sheet. We are going to endure this and we will be the kind of company that I think, having gone through this, will be
Money For Breakfast
2/18/2009 8:42 AM
Money For Breakfast
Alexis: yesterday STARBUCKS introduced a new coffee product called via. I sat down with ceo howard schultz. We discussed that product and the company's stock which is sitting at just under $10, a
Money For Breakfast
2/18/2009 8:40 AM
Money For Breakfast
No doubt about t. Sam and leif, great points all around. Couldn't agree with you more. >>> coming up we'll get a check of the fox 50. And we'll continue part two of my conversation with STARBUCKS ceo about what it takes to get one piping hot company going again. We're going to talk about the economy, the economic downturn. He's going to tell me what his report card is on his performance.
Money For Breakfast
2/18/2009 8:29 AM
Money For Breakfast
President obama will unveil today how he plans to tackle the nation's home foreclosures as we await the release of january's housing starts and permits. We'll also have more on part 2 of my interview with howard schultz over at STARBUCKS. But just to bring you up to date here, housing starts are expected to decline by 4% to 528,000. Permits are supposed to decline by 530,000 or down 3-1/2%.
Money For Breakfast
2/18/2009 8:21 AM
Money For Breakfast
A fighting chance. Alexis: all right, dutch and woody, great having you guys with me. I know we'll continue to cover this for weeks and months to come. >>> coming up we'll continue our talk with STARBUCKS ceo howard schultz and tell us how he is battling the down economy, and what are you doing for falling stock prices. What kind of card does he give on his performance so
Money For Breakfast
2/18/2009 8:11 AM
Money For Breakfast
Full year for monday -- monsanto, ticker mon. >>> coming up, more from detroit, the big three. We'll keep talking about t. Alexis has part two of her interview with howard schultz, the STARBUCKS ceo. For breakfast." we'll be right back.
Money For Breakfast
2/18/2009 7:46 AM
Money For Breakfast
Range of 1 to 2 percent on the year over year basis in the month of february. So there you have it on the retail scene which has been a pretty tough scene. Now, howard schultz is going to join alexis for part two of that interview the STARBUCKS chairman so stay tuned for that. And he will address the falling stock prices in part two of the interview. You will want to see that. Speaking of big name ceos, gm's
Money For Breakfast
2/18/2009 7:38 AM
Money For Breakfast
Causes we think are important, provide healthcare to every single employee which we still do and do the things I think are consistent with guiding principles of our company, our customers are going to reward alexis: in the next hour of have more with STARBUCKS ceo we will ask him about stock prices, how to battle a rough economy, and what kind of report card he would give himself after one year back on the job.
Money For Breakfast
2/18/2009 7:38 AM
Money For Breakfast
We have to provide value every single day to our customers and it's not based on what we think we have to stop talking to ourselves and talk to our customers and make sure that whatever they are buying at STARBUCKS, they think it's worth the money. And at the same time, we have to provide a significantly differentiating experience. I have a lot of respect for the companies you've mentioned. But they are in the fast-food that's not our business.
Money For Breakfast
2/18/2009 7:36 AM
Money For Breakfast
Values, whose corporate social responsibility are compatible with their own. We have a campaign right now with product red and bono. You have seen wit the STARBUCKS -- you have seen it with the STARBUCKS red card and the things we did during the holiday, the attachment rate on that card and what's going on in terms of its velocity is very that's counterintuitive because you would think in this environment people would not be loading up that much money on these cards, and the reason they are doing it is because they want to support a company like STARBUCKS they trust and a cause they can give back to. Alexis: interesting point because about six months ago you said we're not going to do the
Money For Breakfast
2/18/2009 7:35 AM
Money For Breakfast
Of coffee, either fresh brewed or hand craft espresso beverage and a pairing with food. That's $3.95. Now the issue is that whether or not you can afford STARBUCKS and you are a big-time earner or whether you are not pressure in terms of the economics, everybody wants good value. In addition to that, I think what we have also learned over the years is that not only are
Money For Breakfast
2/18/2009 7:35 AM
Money For Breakfast
Tasting coffee is the brewed coffee market. If we get the instant coffee market, that's great. But we have an opportunity to get significant share of the brewed coffee market. Alexis: there has been for years this aura about STARBUCKS, that it's high end, it's this quality it is a treat that we need. And yet in this economy, you have to figure out how to address pricing and quantity without losing some of the mystique of why it's important to step into a STARBUCKS. How are you doing that? >> for any consumer brand today, high or low end, it is incumbent upon us as merchants to put our
Money For Breakfast
2/18/2009 7:34 AM
Money For Breakfast
But let's just look at the u.S. Approximately 65 billion cups of brewed coffee are served nationally in america a year. And if I asked you what percent you think STARBUCKS has of that business, you'd probably say something like double digits. We have less than 4% share, so the target market of this product which is fantastic tasting coffee is the brewed
Money For Breakfast
2/18/2009 7:33 AM
Money For Breakfast
Has not seen any innovation perhaps in 50 years that we can bring new technology, innovation, and most importantly we can replicate the quality and the taste of STARBUCKS coffee in an instant form. And then provide our customers with portability because you can take a cup of STARBUCKS coffee which is completely fresh, replicate the taste, you can take it anywhere, and for less than a dollar a cup, it's a really good value. That wasn't the reason why we created it, but I think few people would say it's a natural place for STARBUCKS to go. But we've had a long history of kind of creating new rituals and transforming the industry. Alexis: a lot of people look at the instant coffee business and they say okay great 17 billion
Money For Breakfast
2/18/2009 7:32 AM
Money For Breakfast
And, you know, all the comments about the future, like so many other companies has been negative for owens corning. We will watch it on the earnings that have just broken. Back to you. Alexis: connell thanks very STARBUCKS unveiled a new product yesterday which offers a less expensive product for consumers and a new product innovation for it is called via. It is the name of new instant coffee and ceo howard schultz is
Money For Breakfast
2/18/2009 7:27 AM
Money For Breakfast
Uncertainty out there. Jetblue says it will refund your ticket if you lose your job. You are up-to-date on the fox for more on the day's top out fox business.Com. Coming up STARBUCKS ceo howard schultz joins alexis in a first on fox interview. Also later gm laid out viability plans yesterday. Gm's ceo rick wagoner joins us do with more money.
Money For Breakfast
2/18/2009 7:14 AM
Money For Breakfast
And will more money actually do isn't that the $64,000 question? And will they frankly become and later, we're going to sit down with STARBUCKS ceo howard schultz, what he is doing to turn the franchise around.
Money For Breakfast
2/18/2009 7:00 AM
Money For Breakfast
So what will it mean for you? We are going to discuss that and STARBUCKS ceo howard schultz will join us. But first it has been a rough night overseas once again many of the markets overseas in asia had very mixed results.
Closing Bell
2/17/2009 4:52 PM
Closing Bell
To find a substitute for it, you're going to do it. >> isn't this one of those trends that doesn't come back so even STARBUCKS founder howard schultz said it, this is one of those trends that is not going to reverse course just because people are having a job in two this is going to stay with us for a long time to come?
Closing Bell
2/17/2009 4:21 PM
Closing Bell
You on the program. >> nice to be with you. >> thank you so much for joining can you set the stage for us, tell us what is going on today in the uk? We had a gentleman on earlier, howard schultz, founder and ceo of STARBUCKS, who seems to believe that the uk is really spiraling, and it is actually at this moment in time worse than the situation in the united can you give us a status check? >> no, the uk is not spiraling, although I noticed STARBUCKS is in a great deal of trouble. So that may be because of their overexpansion given the state of the market. So, please don't project STARBUCKS on to the uk economy as a whole. Look, we face a situation where a global economic crisis has been sparked by what's happened in the banks.
Closing Bell
2/17/2009 3:51 PM
Closing Bell
Howard, great to have you on the congratulations on via ready brew, the instant coffee market, a new innovation today unveiled howard schultz is president, ceo, founder of STARBUCKS. We'll see you soon. >>> it is a sign of the times. A look at the changing face of wall street, the influence it's having on the economy as we speak. For a smarter way only fidelity let's you back-test your strategies
Closing Bell
2/17/2009 3:49 PM
Closing Bell
The quality of the things that we've always done, and we can't play other people's game. We also have at the same time, while we're providing a great provide value. In early march, STARBUCKS will come out with a national price on pairing, which is $3.95. Again, doing the things we have to do to be relevant to the downturn in the economy and the pressure on the consumer. But the most important thing we have to do is realize that the
Closing Bell
2/17/2009 3:46 PM
Closing Bell
Tell me a little bit more about this via readybrew and why customers will want to try it. >> okay. First off, the quality and the proof in the cup has to measure up to STARBUCKS coffee. The research absolutely validates that in a blind taste test, thousands of customers could not tell the difference between STARBUCKS coffee, brewed coffee, and this instant that's step one. Second, the value proposition. For less than $1 a cup, you can have a cup of STARBUCKS coffee. And lastly, you can take this package of coffee anywhere you want, on the go. It's fresh roasted. And whether you're on an airplane or in the office, you can now have STARBUCKS coffee anywhere. >> but how are you going to differentiate between this and the $4-a-cup coffee that people can still get in your stores? >> well, this is not to replace the STARBUCKS brand. This is for the on-the-go 65 billion cups of brewed coffee are sold in america, and STARBUCKS has less than 4% so, when people talk about STARBUCKS being saturated and the growth of the company no longer available, they don't have access to the data. So, we're going to go after this market as well as the $17 billion category, which has lots of wide space overseas, and
Closing Bell
2/17/2009 3:43 PM
Closing Bell
There is a $17 billion coffee category that has not seen any innovation in over 50 years. It's stale, unflavored coffee -- >> that's unbelievable that there's been no innovation >> none. Here we are, STARBUCKS is going to create a breakthrough in technology that replicates the taste of STARBUCKS coffee. You tasted it yourself. >> I did, and I really liked it. >> and for less than $1 a cup, the consumer's going to be able to have STARBUCKS coffee anywhere they want. We'll sell it in our stores beginning march 3rd in seattle and chicago, in london, then nationwide in the fall of '09. >> now, do you worry that this spending, for a consumer to buy
Closing Bell
2/17/2009 3:42 PM
Closing Bell
Uncorrelated assets and trading things like biotech as search fortunate or straight hedges. People in treasuries, or for that matter, long gold. >> STARBUCKS is brewing up a new the world's largest coffee chain unveiling today a new line of instant coffee called via ready it's expected to give them exposure to the $17 billion a year instant coffee market. Joining me is ceo of STARBUCKS, howard schultz. Howard, nice to have you back on >> thank you, maria. >> welcome back to the "closing bell." first, your thoughts on the stimulus package, president obama just signing the bill into what are your thoughts on this?
Closing Bell
2/17/2009 3:36 PM
Closing Bell
Something contrary to what the legislators really want. Talent will leave. >> we will leave it there. Gentlemen, good to have you on the program. We appreciate it. >> howard schultz is here. Talking coffee, coming up. >> from STARBUCKS, talking about a new coffee STARBUCKS is coming out, and we'll also get mr. Schultz's thoughts on the stimulussystem stimulus package. Howard schultz coming up. Hear whether the company's new,
Countdown to the Closing Bell
2/17/2009 3:32 PM
Countdown to the Closing Bell
That's next as countdown to the closing bell continues. Tomorrow, we want to let you on "money for breakfast," alexis glick interviews the chairman and ceo of STARBUCKS, howard we know how tough the economy has been ott STARBUCKS, they've thrown offing they can at the company, you've got to hear what they have to say 7 a.M. Eastern howard schultz here on fox business.
Fox Business
2/17/2009 10:48 AM
Fox Business
Itself over to john malone's liberty media and shares are certainly rallying on that news. Now, customers may like it, but shareholders certainly not right now. STARBUCKS unveiling its brand new ready brew, the title name or the name of its new instant coffee that's unveiled in stores, selling for a buck a cup, good news as I mentioned
Money For Breakfast
2/17/2009 8:45 AM
Money For Breakfast
There's no doubt that the company is struggling. There's a lack of direction. Although howard schultz has come back, they are not sure how to handle this. That stock has been under connell: is that one that you touch STARBUCKS at all? Charles: it is not. Until same-store sales start to turn around, if you see them start to pick up a bit, then perhaps. You can see the stock has come
Money For Breakfast
2/17/2009 8:45 AM
Money For Breakfast
This long, you want to hold I don't see any sense of urgency to buy them at the open. I don't see them getting above 50 really not in this quarter connell: let's talk about STARBUCKS. It unveiled new line of instant coffee this week. It is amazing to talk about the idea and there's some back and forth with the unions going on there as well the idea of STARBUCKS stores and I see them all the time closing down instead of opening up. Whereas wal-mart is in the sweet STARBUCKS is in the opposite situation. Charles: STARBUCKS overexpanded I think some of the stores were actually cannibalizing each other. Are closing. I think lack of demand also, incredible competition, dunkin donuts mcdonald's all stepped up
Money For Breakfast
2/17/2009 8:41 AM
Money For Breakfast
To my surprise I was surprised how much of the myth turned out to be fact. Charles: really? Thanks a lot really appreciate i'm going to go out and check out the book too. >> thanks. Charles: bryan burrough's the big rich. Coming up STARBUCKS wal-mart verizon just some of the fox 50 names that are making headlines we will break them down for you. Also later spring training is here, but will the fans show up? We will look at how the economy is impacting spring training.
Money For Breakfast
2/17/2009 7:55 AM
Money For Breakfast
Charles: pete's coffee, alfred pete started in the coffee business in 1910. He's as famous in the coffee the company is sort of in the shadow of STARBUCKS but they are executing, they are doing everything right. They have given great guidance. They have no debt. Here's the chart. Alexis: it looks pretty awesome. It looks good enough. Charles: considering 99% of the
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Key Fundamentals

SBUX - Starbucks Corporation Fundamentals
Price (3/3/2009 11:17 AM) $8.64
Volume (3/3/2009 11:17 AM) 2.7 Million
10 Day Average Volume 12.2 Million
13 Week Price Range $8.50 - $10.77
52 Week Price Range $7.06 - $18.89
LTM Revenue $10.2 Billion
 
Shares Outstanding (09/2008) 734.6 Million
Market Capitalization $6.4 Billion
Shares Held By Institutions 481.1 Million
Institutional Holders 707
% Shares Held By Institutions 65.50%
Earnings Per Share (EPS) $0.43
P/E Ratio 36.50
Book Value Per Share $3.52
 
Gross Margin 8.60%
Quarterly Dividend 0.00
Dividend Yield 0.00%
Beta 1.04
Fiscal Year Ends September