Starbucks Corporation (SBUX)

Conclusion

Starbucks Corporation roasts, markets and sells coffee through company-operated stores, licensed stores, and grocery and foodservice accounts. On 9 November 2026 the shares closed at 109.44 USD, giving a market capitalisation of 124.8 billion USD.

The verdict is overvalued. The fair value band runs from 57.98 to 86.97 USD with a midpoint of 72.48 USD, a margin of safety of -33.8% at today's price. The price-to-earnings ratio of 49.4 compares with a ten-year median of 30.5, a premium of 61.9%. The enterprise value to EBITDA ratio of 24.5 compares with a median of 19.7, a premium of 24.3%. The discounted cash flow gives 49.05 USD per share, and the fair value from historical multiples is 95.90 USD. The reverse discounted cash flow implies 16.0% annual growth, while revenue grew 5.5% a year over five years and free cash flow per share fell 3.1% a year over the same period.

What supports the case is the return on capital: a return on invested capital of 26.4% against a cost of capital of 8.9%, and free cash flow conversion of 1.47 over the last twelve months. Interest coverage of 8.2x is also comfortable. What would break it is earnings: earnings per share fell 9.0% a year over five years, the current ratio is 0.76, and net debt is 3.2 times EBITDA.

Financial health

The financial strength is yellow: interest coverage of 8.2x and an Altman Z-score of 3.39 hold it up, while a current ratio of 0.76 pulls it down. The quick ratio is 0.50, and net debt to EBITDA of 3.2x is neutral. Debt to equity is not available because the company reports negative shareholders' equity. The Altman Z-score of 3.39 sits in the safe zone, but that model was designed for manufacturers and Starbucks is a restaurant chain. Insolvency risk is medium, about 6.2% by the estimate of the Ohlson model over one to two years.

Earnings quality

Earnings quality is green. Free cash flow conversion is 1.47 over the last twelve months and 1.01 over five years, and the accrual ratio is -0.08, which means cash generation exceeds reported earnings. Stock-based compensation is 1.0% of revenue, and free cash flow after it is 3.36 billion USD. The share count fell 0.7% a year over five years, which reflects buybacks. The Piotroski score is 7 of the 8 criteria that could be evaluated. The Beneish M-score is not available. Over the last eight quarters the company beat earnings estimates four times and missed four times, with an average surprise of 1.9%. Current-year estimates rose 3.4% over 90 days, while next-year estimates rose only 0.3%.

Profitability

Profitability is yellow. The gross margin of 67.7% is well above its ten-year median of 27.8%. The operating margin of 9.7% compares with a median of 15.2%, and the net margin of 6.7% compares with a median of 10.9%. Margin stability is 0.26. Return on invested capital is 26.4% against a cost of capital of 8.9%, and the given gap is 17.5%, with a five-year median return of 26.0%. The DuPont split shows a net margin of 6.7% and an asset turnover of 1.34x. Return on equity is not available because negative equity makes it not meaningful.

Growth

Growth is yellow. Revenue compounded at 1.8% over three years, 5.5% over five years and 5.9% over ten years, and it grew in nine of ten comparable years. Earnings per share compounded at -14.9% over three years, -9.0% over five years and 1.6% over ten years. Free cash flow per share compounded at 0.7% over three years, -3.1% over five years and 4.5% over ten years. Analysts expect next-year earnings per share to grow 16.0%, which is the same growth the reverse discounted cash flow requires.

Valuation

Valuation is red. The price-to-earnings ratio of 49.4 is a premium of 61.9% to its ten-year median of 30.5, and the enterprise value to EBITDA ratio of 24.5 is a premium of 24.3% to its median of 19.7. The price to free cash flow of 33.5 is a premium of 2.3% to its median of 32.7, while the price to sales of 3.3 is a discount of 9.0% to its median of 3.6. The discounted cash flow gives 49.05 USD per share, using a discount rate of 9.9%, first-stage growth of 5.9% and a terminal growth rate of 2.5%. The fair value band of 57.98 to 86.97 USD is an order-of-magnitude estimate built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target. The reverse discounted cash flow implies 16.0% growth, which is 10.5% above the five-year revenue growth and 19.1% above the five-year free cash flow per share growth, both as given. The dividend yield is 2.3%, and dividends absorb 75.8% of free cash flow.

Risks

The weakest numbers would hurt in specific ways. A current ratio of 0.76 means short-term obligations exceed liquid assets, so a slowdown in cash flow would leave little cushion. Net debt of 3.2 times EBITDA limits flexibility if earnings keep falling, and the five-year earnings decline of 9.0% a year shows that margin pressure has already been felt. The medium insolvency risk estimate and the negative shareholders' equity point to a thin capital base. Values not available include debt to equity, return on equity and the Beneish M-score. This analysis has no debt maturity schedule and no revenue split by segment, so it cannot show when debt falls due or which business lines drive growth.