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Starbucks (NASDAQ: SBUX) will be the stock in focus: (Price at time of writing: $56.80 as 26 November 2017)
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Background and overview of Starbucks (SBUX)
Starbucks recently launched it first few shops in South Africa. With people queing out the door to get a taste of one of the most well known coffee outlets in the world. According to the company's website "Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 68 countries. Formed in 1985, Starbucks Corporation’s common stock trades on the NASDAQ Global Select Market ("NASDAQ") under the symbol "SBUX." We purchase and roast high-quality coffees that we sell, along with handcrafted coffee, tea and other beverages and a variety of fresh food items, including snack offerings, through company-operated stores. We also sell a variety of coffee and tea products and license our trademarks through other channels such as licensed stores, grocery and foodservice accounts. In addition to our flagship Starbucks Coffee brand, we sell goods and services under the following brands: Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange and Ethos."
The company's market cap is currently sitting around the $78billion mark. That valuation dwarfs most companies listed on South Africa's JSE.
Below the Starbucks (SBUX) share price for the last 5 years on an interactive technical analysis chart
The company's market cap is currently sitting around the $78billion mark. That valuation dwarfs most companies listed on South Africa's JSE.
Below the Starbucks (SBUX) share price for the last 5 years on an interactive technical analysis chart
Note the Starbucks (SBUX) share price history was obtained here:
http://www.macrotrends.net/stocks/charts/SBUX/prices/starbucks-corp-stock-price-history
http://www.macrotrends.net/stocks/charts/SBUX/prices/starbucks-corp-stock-price-history
Financial review:
The first thing we will look at in Starbucks'financial review is a funnel chart showing a summary of SBUX's income statement. The funnel chart provides a graphical summary of SBUX income, expenses, taxes and profits/losses.
Scroll over or click on the funnel chart to get more details of SBUX's latest financial results.
Starbucks is sitting on a net profit margin of 13.82%. So essentially for every $100 they receive they make $13.82 in profits after paying all expenses and taxes. That is pretty strong net profit margins for someone operating in the retail food industry. No doubt a bit of a premium is charged thanks to their brand name which has been built up over many many years.
Diluted earnings per share came in at $0.54 a share for the quarter. This places SBUX on a PE ratio of around 23.6 (based on annualising their last quarter's results). The PE ratio is pretty high. Seems punters expect SBUX's global expansion to bring in strong future profits. As investors are not investing in Starbucks for its dividend yield. SBUX is currently sitting on a dividend yield of 2.11% (again based on the last quarter's dividend payout being annualised.
Diluted earnings per share came in at $0.54 a share for the quarter. This places SBUX on a PE ratio of around 23.6 (based on annualising their last quarter's results). The PE ratio is pretty high. Seems punters expect SBUX's global expansion to bring in strong future profits. As investors are not investing in Starbucks for its dividend yield. SBUX is currently sitting on a dividend yield of 2.11% (again based on the last quarter's dividend payout being annualised.
Cash generated by operating activities for the 3 months amounted to $3266.9million (or roughly $2.85 a shares). Showing SBUX is a very strong cash generative business (as most of their sales are cash based) and no real purchasing on credit takes place. Cash and equivalents at then end of the three months amounted to $2462million (or $1.68 a share).
Pie chart shows revenue and operating profit earned per region for SBUX:
Pie chart shows revenue and operating profit earned per region for SBUX:
From the pie charts above it's clear that SBUX earns the majority of their revenue in the Americas (around 79% of revenue in fact). China and Asia pacific brings in only around 17.4% of revenue and EMEA around 3.2% of revenue. The split in revenues per region are reflected in the operating profit too, with operating profit contributions being very similar to that of the revenue.
A few financial ratios for SBUX (calculated using our Financial Ratios Calculator):
- Cash generated per share $2.85 per share
- Cash in harnd as percentage of share price: 2.95%
- Net Profit Margin: 13.82%
- Dividend Yield: 2.11%
Valuation:
Based on SBUX's current financial results we value them at between $52.52 and $52.68 We therefore feel that at it's current price it is close to being fully valued and would suggest that value investors look elsewhere if they bargain hunting. Still a great stock to hold, but we suggest looking to buy at levels below or around our valuation mark at $52. SBUX shares have been pretty flat for the last 12 months reflected by the flat and slightly lower income and revenues earned during the period. But the strong increase in dividends for SBUX shareholders should be encouraging and makes SBUX shares more attractive using the Dividend Discount Model (DDM).
For South African investors, please remember exchange rate movements will have an impact on the value of your SBUX shares when the value is calculated in Rand terms.
For South African investors, please remember exchange rate movements will have an impact on the value of your SBUX shares when the value is calculated in Rand terms.
The graphic above shows our valuation and the current share price as at the time of writing this piece.
Note we use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question. Note this is not a binding valuation and investors should do their own research before investing in a specific share. Southafricanmi.com cannot be held liable for any losses incurred, We would accept donations on profits made though ;)
Note we use our Share Valuation Calculator as guide to valuing shares. We believe in value investing and our above mentioned share valuation is based on the underlying fundamentals and financial statements of the stock in question. Note this is not a binding valuation and investors should do their own research before investing in a specific share. Southafricanmi.com cannot be held liable for any losses incurred, We would accept donations on profits made though ;)