Today we're going to take a look at the well-established Starbucks Corporation (NASDAQ:SBUX). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$117 at one point, and dropping to the lows of US$106. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Starbucks' current trading price of US$112 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Starbucks’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Starbucks worth?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 13.12% above my intrinsic value, which means if you buy Starbucks today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $99.33, there’s only an insignificant downside when the price falls to its real value. Furthermore, Starbucks’s low beta implies that the stock is less volatile than the wider market.
What does the future of Starbucks look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 22% over the next couple of years, the future seems bright for Starbucks. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? SBUX’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on SBUX, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you'd like to know more about Starbucks as a business, it's important to be aware of any risks it's facing. When we did our research, we found 3 warning signs for Starbucks (1 is significant!) that we believe deserve your full attention.
If you are no longer interested in Starbucks, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.