Starbucks Analysis

Topics: Generally Accepted Accounting Principles, Balance sheet, Income statement Pages: 3 (1005 words) Published: March 20, 2014
In valuing a company, there are many strategies, formulas, and ratios one can use. In addition, comparing companies to other competitors gives insight into the productivity and value of the company in its given industry. Using the price to earnings ratio is one way to determine the value of Starbucks. It is calculated by taking the market value per share divided by the earnings per share. A higher price to earnings ratio shows that the company’s product is in high demand. The current price to earnings ratio of Starbucks is 29.9, an increase from its price to earnings ratio of 26.8, fifty-two week ago. To understand where Starbucks stands relative to the industry it is in, it is useful to take a look at a few of its competitors. One of Starbucks’ competitors, Panera Bread Co. (PNRA) has a price to earnings ratio of 29.13. Another, Caribou Coffee Company (CBOU), is at 24.00. It is evident, that Starbucks is at the top of the list in regards to price to earnings in its industry.

The earnings per share (EPS) of a company is the portion of a company’s profit allocated to each outstanding share of common stock and is a good indicator of a company’s value. The total EPS for Starbucks over the 2012 fiscal year was 1.79, an increase from 2011’s 1.62 and 2010’s 1.24 earning per share.

Another evaluation can be made for Starbucks value in regards to the price to sales ratio. The price to sales is calculated by dividing a stock's current price by its revenue per share for the trailing 12 months. The price-to-sales ratio can vary substantially across industries; therefore, it's useful mainly when comparing similar companies. Because it doesn't take any expenses or debt into account, the ratio is somewhat limited. However, it does not hurt to take it into consideration. In doing so, one finds out that Starbucks price to sales ratio is 3.0, far ahead of Panera’s 2.2 and Caribou’s 0.73. For what it is worth, Starbucks is in a favorable position compared to its nearest...
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