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Starbucks Corporation Stock Buy Recommendation Reiterated (SBUX)

NEW YORK ( TheStreet) -- Starbucks Corporation (Nasdaq: SBUX) has been reiterated by TheStreet Ratings as a buy with a ratings score of A+. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:

  • SBUX's revenue growth has slightly outpaced the industry average of 2.7%. Since the same quarter one year prior, revenues rose by 11.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • STARBUCKS CORP has improved earnings per share by 27.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, STARBUCKS CORP increased its bottom line by earning $1.79 versus $1.62 in the prior year. This year, the market expects an improvement in earnings ($2.18 versus $1.79).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 26.0% when compared to the same quarter one year prior, rising from $309.80 million to $390.30 million.
  • Net operating cash flow has significantly increased by 179.23% to $305.20 million when compared to the same quarter last year. In addition, STARBUCKS CORP has also vastly surpassed the industry average cash flow growth rate of 8.72%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.

Starbucks Corporation operates as a roaster, marketer, and retailer of specialty coffee worldwide. As of September 30, 2012, the company operated 9,405 company-operated stores and 8,661 licensed stores. Starbucks has a market cap of $47.9 billion and is part of the services sector and leisure industry. The company has a P/E ratio of 32.00, above the S&P 500 P/E ratio of 18.00. Shares are up 20.7% year to date as of the close of trading on Tuesday.

You can view the full Starbucks Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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