FIN571 Stock Valuation Sample Assignment
Stock Valuation and Analysis for Starbucks
Stock Valuation and Analysis for Starbucks
Stock valuation is very important for investors. By understanding the financial information provided by the company, investors can evaluate the stock value and make a decision on whether to invest or not. There are factors that are taken into consideration by investors. These factors should be analyzed before advising someone to get into the business. Some of these factors include: The 52-week range, the stock volume, price to earnings ratio, enterprise value, current stock price, Beta (volatility), dividends and yields, types of rating recommended by analyst, target price prediction for the stock, analyst revenue estimation for the next year, significance news items and press of the company over the last year among others. I recommend investing in Starbucks.
Question 1: What is the ticker symbol of the company you chose? SBUX
Question 2: What is the Current Stock Price? The current stock price is $57.99
Question 3: What is the Market Cap for the stock you chose? 82.508 Billion dollars
Question 4: What is the Price to Earnings Ratio? Starbucks has a price to earnings ratio of 19.23
Question 5: What is the Dividend and Yield? Starbucks has a dividend of 1.20 which is equivalent to 1.98 %.
`Question 6: What is the Enterprise Value? the company has an enterprise value of 83.8B US dollars.
Question 7: What is the Beta? Starbucks has Beta of 0.60 US dollars
Question 8: Was there a Stock Split, and if so, when? Yes, The Company had a stock split on April 9, 2015.
Question 9: What was the closing stock price for the last 5 days? The closing stock for the last five days was; 57.99, 60.55, 60.83, 61.69 and 61.41 all values in US dollars.
Question 10: What was the 52 Week High for this stock? Starbucks had the highest stock price of 64.87 US dollars in the 52-week analysis.
Question 11: What is the Book Value per Share? Book value per share was 3.81 US dollar.
Question 12: What type of rating are analysts recommending (i.e. buy, hold, etc.)? The type of rating recommended by analyst is to buy.
Question 13: What is the target price analysts are predicting for this stock? The target price predicted by analyst for this stock is 64.29 US dollars.
Question 14: What is the analyst's average revenue estimate for next year? The analyst average revenue for next year is 26.95B US dollars.
Question 15: What are some of the significant news items and press releases
made by the company over the last year? The significant news and the press release made by SBUX over the last year are Shanghai roaster opened as the world’s highest grossing Starbucks.
Relationship between the value of the stock and the Price to Earnings Ratio
Starbucks has a stock price of 57.99 and price to earnings ratio of 19.23. “Price to Earnings Ratio measures how much investors are willing to pay per dollar of current earnings; higher PEs are often taken to mean that the firm has significant prospects for future growth. If a firm had no or almost no earnings, its PE would probably be quite large” (Ross et al., 2016). The price to earnings ratio is obtained by dividing the stock price by earnings per share (EPS). If the cost of a stock is high, then the price to earnings ratio also increases.
The price to earnings ratio tells us how much the investor has to pay for the stock. Since Starbucks has a price to earnings ratio of 19.23, this ratio is not that big, so what it means for investors is that they are not paying more to earn one dollar and what investors will get attract to is when the price to earnings ratio is high. By having a small price to earnings ratio means that more people can buy shares at a lower price and sell them when the price rises. Analysists are recommending to buy since the price of the stock will rise and the revenue will be higher.
Market Capitalization and Beta. “The Market Capitalization of a public firm is equal to the firm’s stock market price per share multiplied by the number of shares outstanding” (Ross et al., 2016). Starbucks market cap is $82,508 Billion. The Market cap number is very useful for potential buyers. The number for Starbucks is high which means that there is a lower chance of risk when investing in the company. The market cap gives an accurate value of the company that also includes information about the number of investors who are willing to invest in the company.
Beta is another important factor when considering in investing on a company. What beta measures is the amount of risk the investor would like to take. The higher the number for beta, the higher the risk the investor will take. Also, the higher the number, the higher the risk of losing money. On the other hand, the lower the beta amount, the lower the risk the investor will take. Starbucks beta is 0.60 which is pretty low. What it means is that investors have a low chance of losing money. The best thing to do is to invest in this stock at the moment since the company is doing so well and according to analysts, it will get better.
Starbucks is a company that has been opened since 1971 and it started in Seattle, WA. Nowadays, Starbucks has 23,768 locations worldwide. The more they are expanding, the more customers they have around the world. For investors is really important to check the news and the company’s press releases. One of Starbucks recent news is with their new store in Shanghai, the company had an insane number in sales. These types of news are an important factor on whether to invest or not in a company, if there are news that the company is profitable, then investors are going to want to make some money and invest in the company that has a lower risk of losing money and also has a high value, which means more money. The recommendations from analysts help investors see the future numbers and if it is good to buy the stock now or later. Therefore, it is obvious that investing in Starbucks will yield more profit to investors.
Ross, S., Westerfield, R., & Jaffe, J. & Jordan, B. (2016). Corporate Finance (11th ed.). New York, NY: McGraw - Hill Education.
Yahoo Finance. (2018). Retrieved from https://finance.yahoo.com/quote/SBUX/press-releases?p=SBUX