CURRENT RATIO:
CURRENT ASSETS
CURRENT LIABILITIES
QUICK RATIO:
CURRENT ASSETS-INVENTORY
CURRENT LIABILITY
1,368
782,980
1,368,485-422,663
782,980
=1.75%
=1.21%
TOTAL DEBT RATIO:
TOTAL DEBT
TOTAL ASSETS
3,618
3,328,168
=.0011%
EQUITY MULTIPLIER RATIO:
TOTAL ASSETS
COMMON EQUITY
3,328,168
2,486,755
=1.34%
INVENTORY TURNOVER:
SALES
INVENTORY
5,294,247
422,663
=12.53%
TOTAL ASSET TURNOVER:
SALES
TOTAL ASSETS
5,294,247
3,328,168
=1.59%
PROFIT MARGIN:
NET INCOME
SALES
391,775
5,294,247
=0.07%
RETURN ON ASSETS (ROA):
NET INCOME
TOTAL ASSETS
391,775
3,328,168
=0.12%
RETURN ON EQUITY (ROE):
NET INCOME
TOTAL EQUITY
391,775
2,486,755
=0.16%
MARKET-TO-BOOK:
MARKET VALUE PER SHARE
BOOK VALUE PER SHARE
PRICE-TO-EARNINGS (P/E):
PRICE PER SHARE
EARNINGS PER SHARE
20,611,532
57.17
1.03
=49.68%
I would buy long on Starbucks shares based on the ratios calculated in part one. The
reason behind this decision is based on solely on the ratios and how they have only
increased since 2002. Thompson financial gave the ratios from 2002, 2003 and 2004,
and the ratios have only increased, so this goes to show that the company is growing and
increasing. Starbucks seems to be a very stable company and doesn’t seem to be going
down anytime soon. If you compare Starbucks to the industry, the ratio numbers and
dividends are rather close to each other. So, when comparing, the industry could be
looked at as the benchmark, and the company would be Starbucks. I definitely would
buy long with Starbucks.
Stock Project, Part #2
SML: Ki = Krf + ( Km – Krf ) bi
Krf = 4.46
Km = 12.27
Bi = 0.71
Ki = 4.46 + ( 12.27 – 4.46 ) 0.71
Ki = 4.46 + ( 7.81 ) 0.71
Ki = 4.46 + 5.55
Ki = 10.01%
Ks = ( D1 / P0 ) + g
g = 20.6
Do = 1.75
D1 = Do ( 1 + g )
D1 = 1.75 (1 + .206 )
D1 = 1.75 ( 1.206 )
D1 = 2.11
D1 = 2.11
Po = 46.22
g = 20.6
Ks = ( 2.11 / 46.22 ) + .206
Ks = .0457 + .206
Ks = .2517 or 25.17%
Starbucks SWOT Analysis
Strengths
-Excellent product diversification such as coffee, baked goods, CD’s, espresso
machines, coffee machines, coffee cups, traveler cups, board games, stuffed
animals, candy
-Established logo, developed brand, copyrights, trademarks, websites, and patents
-Company Operated Retail Stores, International Stores
-High visibility locations to attract customers
-Valued and motivated employees with a low employee turnover
-Good relationships with coffee suppliers
-Starbucks is not a franchise
-Market leader in the coffee industry
-Becoming much more globalized
Weaknesses
-Ever-increasing number of competitors in a growing market
-Clustering of too many shops in a small area: self cannibalization
-Cross functional management
-Price of drinks rather expensive
Opportunities
-Expansion into retail operations
-Technological advances, such as ordering drinks over the internet
-Finding new distribution channels such as delivery
-Launching new products
-International market expansion
-Distribution agreements
-Starbucks brand name extension
Threats
-Competition such as restaurants, street carts, supermarkets, other coffee shops,
and other caffeinated products
-Coffee price volatility in developing countries
-Poorly treated farmers struggling to make a living in those countries supplying
the coffee beans, which is a negative publicity
-Consumer trends toward more healthy ways of living and away from caffeine
Conclusion
Starbucks Corporation is a large multinational chain of coffee shops, often serving
desserts, with a reputation in the US as a center for socializing, particularly among
students and young urban professionals. I would definitely have to say that Starbucks
Corporation is rather accurately priced. According to the Analyst Ratings from the
CNBC website, Starbucks has the highest hold in every month but the strong buy is not
far behind. Starbucks has always been a pretty stable corporation and their prices have
never really fluctuated. Starbucks has many more strengths than weaknesses so that just
goes to show that it is a rather firm corporation. As long as “students and young
professionals” are going to be around, Starbucks Corporation is not going anywhere, and
only going to increase in sales and revenue.