Starbucks Corporation Stock Buy Recommendation Reiterated (SBUX)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

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, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 0.5%. Since the same quarter one year prior, revenues rose by 12.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • SBUX's debt-to-equity ratio is very low at 0.10 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
  • STARBUCKS CORP has improved earnings per share by 19.4% 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 $1.62 versus $1.24 in the prior year. This year, the market expects an improvement in earnings ($1.78 versus $1.62).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Hotels, Restaurants & Leisure industry average. The net income increased by 19.3% when compared to the same quarter one year prior, going from $279.30 million to $333.20 million.
  • Net operating cash flow has increased to $551.30 million or 20.58% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.94%.

Starbucks Corporation purchases and roasts whole bean coffees. It operates 6,705 company-operated stores and 4,082 licensed stores in the United States; and 2,326 company-operated stores and 3,890 licensed stores in Canada, the U.K., China, Germany, Thailand, and internationally. The company has a P/E ratio of 28.4, equal to the average leisure industry P/E ratio and above the S&P 500 P/E ratio of 17.7. Starbucks has a market cap of $38.79 billion and is part of the services sector and leisure industry. Shares are up 10.9% year to date as of the close of trading on Friday.

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.

FREE from Real Money's Jim Cramer: Winners and Losers Election 2012 - Steps to take NOW so you can profit no matter who is in charge! Free Download Now
null

If you liked this article you might like

The 10 Craziest Pumpkin Spice Items You Can Buy off Amazon

These Powerful Corporate Executives Could Make a Run at the Presidency in 2020

CEOs Are Dropping Like Flies

Sorry Elon Musk but Artificial Intelligence Grows Jobs: Domino's Pizza CEO

Cramer: Dominoes Are in Play Today