by winston » Wed Dec 27, 2017 2:34 pm
not vested
Starbucks (SBUX)
by Michael Farr
Starbucks is the premier roaster, marketer and retailer of specialty coffees in the world, with over 27,339 stores in 75 countries.
Following several years of very strong earnings growth, the stock has been flat over the past 2+ years due mostly to a deceleration in same-store sales growth to the low-single digits from the mid- to high-single digits it had been reporting for years.
Management has attributed the deceleration to both a difficult consumer/retail backdrop as well strong customer acceptance of the company's new mobile order & pay solution, which has caused a bottleneck in filling customer orders in a timely fashion.
We think this is a high-class problem, and that this temporary setback creates an opportunity for growth-oriented investors willing to be patient.
The company's recently revised long-term growth algorithm calls for 12 percent+ annual earnings per share growth driven by high single-digit revenue growth, 3-5 percent global same-store sales growth, and annual returns on invested capital of at least 25 percent.
We also anticipate that the company can continue growing its global store base by 7 percent-8 percent annually, driven by outsized growth from relatively under penetrated China.
Recent sizeable investments in new platforms, products, people and technologies should help enable success in hitting these targets.
The stock trades at a 24 times the consensus for calendar year 2018 earnings per share, which is a discount to similar companies. The dividend is 2.1 percent.
Source: CNBC
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