Starbucks Ratios

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Starbucks Ratio Analysis

2. Market Capitalization = closing price * shares outstanding = 37.29 * 742.6
= 27691.55

3. A. P/E = Price per share / Earnings per share
= 37.29 / 1.66
= 22.46 times

B. Market-to-Book = Market price per share / Book value per share = Price per share / (Total shareholders’ equity / Shares outstanding) = 37.29 / (4384.9 / 742.6)
= 6.32 times

C. Enterprise value-to-EBITDA= Enterprise value / EBITDA
= (Total debt + Market capitalization- cash) / EBITDA = (2973.1+27691.55-1148.1) / (1728.5+115.9+523.3) = 12.47 times

D. Operating margin = Operating income / Sales
= 1728.5 / 11700.4
= 14.77%

E. Net profit margin = Net income / Sales
= 1245.7 / 11700.4
= 10.65%

F. Current ratio = Current asset / Current liabilities
= 3794.9 / 2075.8
= 1.83 times

G. Total debt to Total assets = 2973.1 / 7360.4 = 40.39%

H. Interest coverage ration = EBIT / Interest expense
= (Operating income +Interest income and other)/Interest expense
=(1728.5+115.9)/ 33.3
= 55.39 times

I. Return on Equity = Net income / (Total equity) * (Assets / Assets)
= (Net income/Assets) * (Assets/Total equity)
= Return on Assets * Equity Multiplier * (Sales / Sales)
= (Net income/Sales) * (Sales/Assets) * Equity Multiplier
= Net profit margin * Total assets turnover * Equity Multiplier
= 10.65% * (11700.4/7360.4) * (7360.4/4387.3)
= 10.65% * 1.59 * 1.68
= 28.45%

Fiscal Year Ended| Oct 2, 2011| Oct 3, 2010| Sep 27, 2009| Closing price| 37.29| 25.94| 19.83|
P/E ratio| 22.46| 20.43| 37.42|
Market-to-Book| 6.32| 5.23| 4.82|
EV-to-EBITDA| 12.47| 11.80| 19.29|
Operating margin| 14.77%| 13%| 6%|
Net profit margin| 10.65%| 9.09%| 4%|
Current ratio| 1.83| 1.55| 1.29|
Total debt to Total assets| 40.39%| 42%| 45%|
Interest coverage ration| 55.39| 44.94| 15.32|
Return on equity| 28.45%| 26.42%| 12.74%|

1. The Starbucks has the highest P/E ratio in 2009 and has a much lower ratio in both 2010 and 2011. The difference is displayed below. Compared with earnings per share in 2009, the EPS in 2010 and 2011 increase 2.4((1.27/0.53)) and 3.13 times, respectively. However, the EPS in 2010 and 2011 just increase 1.31 and 1.88 times, respectively. Therefore, the P/E ratio decreases.

Since high P/E ratio means that the firm has significant prospects for future growth and more people are willing to invest, from most investors’ perspective, the future growth of Starbucks would not be as good as it was in 2009.

2. The Market-to-Book ratio of Starbucks increases year by year because the market value per share increases faster than total equity does (the shares outstanding are almost constant in those three years). The increase means that Starbucks did well in creating value for its shareholders.

3. The Ev-to-EBITDA decreases from 19.29 times in 2009 to 11.80 and 12.47 in 2010 and 2011, respectively. There are two factors causing these differences. Firstly, the cash and cash equivalents of 2009 are much lower than they are in 2010 and 2011. Secondly, the EIBT of 2009 is just one third of it is in 2010 and 2011. Since higher Enterprise Value Multiples (Ev-to-EBITDA) indicates higher growth rate of a firm, Starbucks has lower growth rate in both 2010 and 2011 than it has in 2009.

4. The Operating margin of Starbucks doubles from 2009 to 2011 because the operating income grows 200% ((1728.5/562.0)-1) during these two years while the sales only increases 19.70% ((11700.4/9774.6)-1). The Operating margin shows the operating efficiency of a firm without considering...
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