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, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.

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Highlights from the ratings report include:
  • SBUX's revenue growth has slightly outpaced the industry average of 3.0%. 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 ($2.16 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.
  • The gross profit margin for STARBUCKS CORP is rather low; currently it is at 24.60%. Regardless of SBUX's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 10.97% trails the industry average.
  • In its most recent trading session, SBUX has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 $45.0 billion and is part of the services sector and leisure industry. The company has a P/E ratio of 31.00, above the S&P 500 P/E ratio of 18.00. Shares are up 12.1% year to date as of the close of trading on Thursday.

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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