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Starbucks Corporation, incorporated on 1985, purchases, roasts and retails coffee through company operated stores and licensed stores in the United States, Canada, U.K, China, Germany, Thailand, etc. The company operates roughly 9,040 company operated stores and 4,776 licensed stores. In 2011 it opened 49 new company operated stores, and 51 one were closed. Internationally, it opened 180 company-operated stores and closed 36. In October of 2010, it purchased Magic Johnson Enterprises remaining 50% interest in urban coffee opportunities and in Nov 2011 it acquired Evolution Fresh, Inc.

Reasons to be bullish on Starbucks Corp:

  • A strong levered free cash flow of $770 million
  • A good quarterly revenue growth of 14.7%
  • Net income soared from $391 million in 2009 to $1.24 billion in 2011
  • EBITDA increased from $1.1 billion in 2009 to $2.3 billion in 2011.
  • Cash flow per share increased from $1.57 in 2009 to $2.30 in 2011
  • A quarterly earnings growth rate of 18.5%
  • A good five year ROE Average of 25%
  • A 5 year sales growth of 5.64%
  • Sales increased from $9.7 billion in 2009 to $11.7 billion in 2011
  • Annual EPS before NRI increased from $.87 in 2007 to $1.52 in 2011
  • A very low long-term debt to equity ratio of 0.11
  • A very strong interest coverage ratio of 52.9
  • A great current ratio of 2.21
  • A good quick ratio of 1.32
  • A projected 3-5 year EPS growth rate of 17.7%
  • A manageable payout ratio of 42%
  • It has strong institutional support; percentage held by institutions is 78%
  • Total return for the last three years is a strong 331%
  • Year over year projected growth rates of 27.7% and 25.11% for 2012 and 2013 respectively.
  • $100K invested for 10 years would have grown to $534K

Suggested strategy

We would wait for SBUX to test the 49-50 ranges before deploying money into it. Another option is to wait for those ranges to be tested and then to sell puts at strikes you would not mind owning the stock; for example, in the 45-49 ranges.

Company: Starbucks Corp (NASDAQ:SBUX)

Levered free cash = $770 Million

Growth

  1. Net Income ($mil) 12/2011 = 1246
  2. Net Income ($mil) 12/2010 = 946
  3. Net Income ($mil) 12/2009 = 391
  1. EBITDA ($mil) 12/2011 = 2394
  2. EBITDA ($mil) 12/2010 = 2011
  3. EBITDA ($mil) 12/2009 = 1162
  4. Cash Flow ($/share) 12/2011 = 2.3
  5. Cash Flow ($/share) 12/2010 = 2.05
  6. Cash Flow ($/share) 12/2009 = 1.57
  1. Sales ($mil) 12/2011 = 11700
  2. Sales ($mil) 12/2010 = 10707
  3. Sales ($mil) 12/2009 = 9775
  1. Annual EPS before NRI 12/2007 = 0.87
  2. Annual EPS before NRI 12/2008 = 0.71
  3. Annual EPS before NRI 12/2009 = 0.8
  4. Annual EPS before NRI 12/2010 = 1.28
  5. Annual EPS before NRI 12/2011 = 1.52

Dividend history

  1. Dividend Yield = 1.24
  2. Dividend Yield 5 Year Average 12/2011 = 0.62
  3. Dividend 5 year Growth 12/2011 = N/A

Dividend sustainability

  1. Payout Ratio 09/2011 = 0.42
  2. Payout Ratio 5 Year Average 12/2011 = 0.15

Performance

  1. Next 3-5 Year Estimate EPS Growth rate = 17.78
  2. EPS Growth Quarterly (1)/Q(-3) = -117.65
  3. 5 Year History EPS Growth 12/2011 = 20.08
  4. ROE 5 Year Average 12/2011 = 25.4
  5. Return on Investment 12/2011 = 24.05
  1. Current Ratio 12/2011 = 2.21
  2. Current Ratio 5 Year Average = 1.32
  3. Quick Ratio = 1.36
  4. Cash Ratio = 1.18
  5. Interest Coverage Quarterly = 52.92

Valuation

Book Value Quarterly = 6.82

Price/ Book = 8.07

Price/ Cash Flow = 23.88

Price/ Sales = 3.29

EV/EBITDA 12 Mo = 16.61

RELATED COMPANIES

Related companies data obtained from barchart.com. An explanation for many of the key ratios used here was covered in this article: Freeport McMoRan 1 Of 5 Eye Catching Plays.

For investors looking for other ideas some data has been provided on four additional companies to get you started. If you are looking for more ideas then consider reading this article: CenturyLink: To Buy Or Not To Buy.

Tim Hortons Inc. (THI)

Levered Free Cash Flow: $266 million

Net income for the past three years

Net Income 2009 = $281 million

Net Income 2010 = $ 627 million

Net Income 2011 = $ 375 million

Operating margins = 13.3%

Profit margins = 19.5%

Quarterly revenue growth = 12%

Quarterly earnings growth = 10%

Total cash flow from operating activities

2009 = $420 million

2010 = $ 528 million

2011 = $ 384 million

Gross Profit

2009 = $925 million

2010 = $ 1.01 billion

2011 = $ 1.05 billion

Dividend yield 5 year average = 1.10%

Dividend growth rate 5 year average = 26.4%

Payout Ratio = 30%

5 year sales growth= 12.6%

Current Ratio = 1.30

Quick Ratio = 0.7

Long term debt to equity= 0.4

Interest Coverage = 19.00

Yum! Brands, Inc. (NYSE:YUM)

Levered Free Cash Flow: $973 million

Net income for the past three years

Net Income 2009 = $1.07 billion

Net Income 2010 = $1.15 billion

Net Income 2011 = $1.31 billion

Operating margins = 16.09%

Profit margins = 11.69%

Quarterly revenue growth = 13.10%

Quarterly earnings growth = 73%

Total cash flow from operating activities

2009 = $1.4 billion

2010 = $ 1.96 billion

2011 = $ 2.17 billion

Gross Profit

2009 = $ 2.9 billion

2010 = $ 3.2 billion

2011 = $ 3.4 billion

Dividend yield 5 year average = 2.10

Dividend growth rate 5 year average = 17.8

5 year sales growth= 4.46

Current Ratio = 1.00

Quick Ratio = 0.6

Long term debt to equity= 1.40

Interest Coverage = 11.80

Payout Ratio = 34.00

Cracker Barrel Old Country Store, Inc (NASDAQ:CBRL)

Levered Free Cash Flow: $ 92.86 million

Net income for the past three years

Net Income 2009 = $65 million

Net Income 2010 = $85.2 million

Net Income 2011 = $85.2 million

Operating margins = 3.3%

Profit margins = 6.5%

Quarterly revenue growth = 5.10%

Quarterly earnings growth = -11.00%

Total cash flow from operating activities

2009 = $ 164 million

2010 = $ 212 million

2011 = $ 138 million

Gross Profit

2009 = $1.60 billion

2010 = $ 1.65 billion

2011 = $ 1.66 billion

Dividend yield 5 year average = 2.20

Dividend growth rate 5 year average = 10.88

Payout Ratio = 27

5 year sales growth= 0.35

Current Ratio = 1.00

Quick Ratio = 0.5

Long term debt to equity= 1.69

Interest Coverage = 3.20

Darden Restaurants, Inc. (NYSE:DRI)

Levered Free Cash Flow: $ 93.7 million

Net income for the past three years

Net Income 2009 = $372 million

Net Income 2010 = $ 404 million

Net Income 2011 = $476 million

Operating margins = 5.8%

Profit margins = 9.17%

Quarterly revenue growth = 9.3%

Quarterly earnings growth = 8.5%

Total cash flow from operating activities

2009 = $783 million

2010 = $903 million

2011 = $ 894 million

Gross Profit

2009 = $1.5 billion

2010 = $ 1.6 billion

2011 = $ 1.8 billion

Dividend yield 5 year average = 2.00%

Dividend growth rate 5 year average = 26%

Payout Ratio = 47%

5 year sales growth= 6.11%

Current Ratio = 0.10

Quick Ratio = 0.4

Long term debt to equity= 0.85

Interest Coverage = 7.40

Conclusion

The markets are oversold on a short term basis and it would not surprise us if they mounted some sort of relief rally before trending downwards again. Long-term investors can use strong pullbacks to slowly start deploying money into long-term investments.

Disclaimer

This list of stocks is meant to serve as a starting point. Please do not treat this as a buying list. It is imperative that you do your due diligence and then determine if any of the above plays meet with your risk tolerance levels. The Latin maxim caveat emptor applies - let the buyer beware.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: EPS and Price Vs industry charts obtained from zacks.com. A major portion of the historical data used in this article was obtained from zacks.com. Earnings and growth estimate charts sourced from dailyfinance.com.