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Starbucks (NASDAQ:SBUX) is a widely-known cultural phenomenon. Most investors know its products, clientele, and public image. The recent move by Starbucks to sell capsules for the Keurig single-serving coffee makers has spooked Green Mountain Coffee Roasters (NASDAQ:GMCR) investors. Should investors flock to either of these two coffee companies based on their familiarity with coffee products and news stories?

No, investors should not let familiarity or news control their decisions. Don't get me wrong, I love Starbucks products. But as simple as it sounds, you are better off shopping around for better valuations instead of focusing on popular newsmakers. There are many stocks which offer comparable growth prospects. Moreover, many of them are trading at lower price multiples.

Ultimately, a stock's earnings and future cash flows determine its value. The future financial potential of a stock can be gauged by using financial metrics to determine how cheaply a stock is priced, its ability to weather hardship, and its growth potential.

As alternatives to SBUX and GMCR, consider the following stocks with strong track-records and solid credit scores:

Ticker

Company

Industry

10-Year Average ROE

Altman Z-score

AOSL

Alpha & Omega Semiconductor

Semiconductor - Specialized

9.8%

3.72

ATRO

Astronics Corporation

Aerospace/Defense Products & Services

12.2%

6.74

BPI

Bridgepoint Education, Inc.

Education & Training Services

10.8%

7.50

BRLI

Bio-Reference Laboratories

Medical Laboratories & Research

20.1%

8.04

DECK

Deckers Outdoor Corp.

Textile - Apparel Footwear & Accessories

16.0%

7.93

HFC

HollyFrontier Corporation

Oil & Gas Refining & Marketing

26.0%

3.13

LOPE

Grand Canyon Education, Inc.

Education & Training Services

9.4%

5.68

TISI

Team Inc.

Business Services

15.7%

5.66

VRTU

Virtusa Corp.

Information Technology Services

17.5%

6.77

SBUX

Starbucks Corporation

Specialty Eateries

20.7%

11.66

GMCR

Green Mountain Coffee Roasters

Processed & Packaged Goods

17.1%

6.24

Like SBUX and GMCR, these alternative stocks are all categorized as "safe" according to the Altman Z-score*, which indicates that they are not considered bankruptcy risks. Moreover, the average 10-year return on equity demonstrates that these stocks have grown shareholder wealth at a respectable annual rate. It is clear from these two metrics that each of these alternative stocks is a "high" quality stock capable of weathering bad times and delivering positive long-term results.

What's more, these alternative stocks are cheaper while still providing high growth prospects:

Ticker

P/E

P/S

P/B

EPS growth past 5 years

EPS growth next 5 years

Sales growth past 5 years

AOSL

10.86

0.71

0.93

67.5%

20.0%

17.7%

ATRO

19.86

1.88

4.13

19.2%

19.0%

15.6%

BPI

8.07

1.35

3.55

67.2%

18.3%

100.8%

BRLI

17.92

1.08

3.27

24.9%

18.8%

23.7%

DECK

13.1

1.87

3.07

45.0%

18.7%

35.2%

HFC

5.62

0.46

1.39

24.8%

22.2%

30.9%

LOPE

15.9

1.85

4.84

257.1%

21.4%

42.7%

TISI

20.81

1.12

2.88

18.0%

27.5%

14.4%

VRTU

21.29

1.61

1.97

79.1%

23.4%

23.2%

SBUX

33.34

3.42

8.73

17.1%

18.4%

8.5%

GMCR

27.58

2.56

4.08

75.4%

32.9%

63.7%

These alternatives beat SBUX and GMCR in value and safety, while beating SBUX on growth. Based on lower price-to-earnings ratios, price-to-sales ratios, and price-to-book ratios, these stocks are cheaper than SBUX and GMCR at current market prices. Better yet, they have excellent growth prospects which rival SBUX, though they do not match the growth trajectory expected for GMCR before its recent drop.(It is likely that analysts will lower their growth estimates for GMCR to reflect competition in Keurig-type platforms. Thus, comparing their growth prospects to outdated growth prospects for GMCR is dubious.)

I have to state for the record that I love buying a Frappuccino from Starbucks. But even though I am willing to shell out $4 for a frozen coffee drink doesn't mean that I would pay such high price multiples for coffee stocks. These valuations are too rich, even for die-hard coffee fanatics.

*Please read the article disclaimer.

Source: Coffee Stock Jitters? Consider These 9 Alternatives