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.
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