For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Starbucks Corporation’s (NASDAQ:SBUX) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for Starbucks
How SBUX fared against its long-term earnings performance and its industry
I look at data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This enables me to analyze different stocks on a similar basis, using the latest information. For Starbucks, its most recent bottom-line (trailing twelve month) is US$4.38B, which, in comparison to the previous year’s figure, has escalated by a non-trivial 52.13%. Since these figures are relatively short-term, I have estimated an annualized five-year value for SBUX’s net income, which stands at US$1.90B This means that, generally, Starbucks has been able to increasingly improve its bottom line over the last few years as well.
What’s enabled this growth? Well, let’s take a look at if it is only due to industry tailwinds, or if Starbucks has seen some company-specific growth. Over the last couple of years, Starbucks expanded its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Looking at growth from a sector-level, the US hospitality industry has been growing its average earnings by double-digit 14.74% over the past year, and 11.07% over the past five. This means any uplift the industry is profiting from, Starbucks is capable of amplifying this to its advantage.
What does this mean?
Starbucks’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Starbucks has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Starbucks to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for SBUX’s future growth? Take a look at our free research report of analyst consensus for SBUX’s outlook.
- 2. Financial Health: Is SBUX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.