The coffee giant, which has also become a cultural phenomenon, has built itself into one of the top three quick service restaurants not only in the U.S. but across the globe. What's scary about this company is that, despite its successful track record, I don't believe that Starbucks has reached its full potential.
Like McDonald's (MCD), Starbucks has demonstrated a remarkable ability to innovate, which we don't typically expect from a restaurant operation. Unlike McDonald's, though, I can't say that Starbucks's stock is on the value menu -- not at a price-to-earnings ratio of 37, which is more than twice that of McDonald's P/E of 18.
As of this writing the stock is up more than 7%, reaching a high of $73.52. Investors are rewarding the company for yet another solid earnings result, which included a 25% jump third-quarter profits. So, I don't want to overstate the importance of value here. Nor do I want to put too much emphasis on the P/E ratios, especially when Starbucks is performing so well.But with Starbucks now priced for perfection, pressure is on managements to keep the jolt going. That's no easy task.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV