Today we’re going to take a look at the well-established Starbucks Corporation (NASDAQ:SBUX). The company’s stock had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of $55.4 to $59.83. However, is this the true valuation level of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Starbucks’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Starbucks
Is Starbucks still cheap?Great news for investors – Starbucks is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $142.91, but it is currently trading at US$57.49 on the share market, meaning that there is still an opportunity to buy now. Another thing to keep in mind is that Starbucks’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
Can we expect growth from Starbucks?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -2.77% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Starbucks. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although SBUX is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to SBUX, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on SBUX for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Starbucks. You can find everything you need to know about Starbucks in the latest infographic research report. If you are no longer interested in Starbucks, you can use our free platform to see my list of over 50 other stocks with a high growth potential.