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, good cash flow from operations, increase in net income 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.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 3.9%. Since the same quarter one year prior, revenues rose by 11.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • SBUX's debt-to-equity ratio is very low at 0.11 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 1.14, which illustrates the ability to avoid short-term cash problems.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income increased by 0.2% when compared to the same quarter one year prior, going from $358.30 million to $359.00 million.
  • Net operating cash flow has increased to $623.40 million or 28.35% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -10.53%.
  • STARBUCKS CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. 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 ($2.15 versus $1.79).

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 $39.68 billion and is part of the services sector and leisure industry. The company has a P/E ratio of 29.8, above the S&P 500 P/E ratio of 17.7. Shares are up 16% year to date as of the close of trading on Monday.

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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