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Does the Data Support Starbucks?

From the time that I announced I was doing a series on popular brands, I’m sure many of you wondered when I was going to talk about Starbucks Corp. (SBUX). Well, today is that day.

I’m sure you all have a personal opinion about Starbucks drinks, and since it’s such a popular company, there’s no shortage of reporting on how the company is doing. For example, you may already know that Starbucks’ stock price has increased 39% in the past year and it reported a 2.20% earnings surprise in its fiscal first quarter (Starbucks ends its fiscal year in September).

When looking at the Turner Analytics database graph (below), we can also see that Starbucks shares have steadily climbed higher over the past three years.

2.3.16 - SBUX

These statistics sound good, but the Turner Analytics database gives SBUX a Fundamental Score of 41 out of 100 and a Technical Score of 70 out of 100. All in all, this ranks SBUX as a Hold.

Why? There are many factors, but a lot of it has to do with the company’s earnings growth. When calculating Starbucks’ Fundamental Score, my screens assigned no points for quarter-over-quarter earnings growth, year-over-year earnings growth or multi-year earnings growth. Combined, these three categories result in a loss of 33 points toward Starbucks’ Fundamental Score. When you add this to the fact that its Sector (Consumer Discretionary) and Industry (Specialty Eateries) are both in bear mode, there isn’t much to support a Buy rating.

At this point, you might be thinking, “But Starbucks has so much going for it!” And on the surface, that’s true. Starbucks has expanded its business to include food items, grocery store items (such as packaged coffee or K-cups) and merchandise that provide great revenue for it. The company has also proven itself very skilled at marketing itself and drawing in customers—not to mention expanding its presence, both in the U.S. and abroad.

However, sluggish earnings growth and a tough environment counteract that momentum and keep SBUX as a hold. I’d recommend that you avoid making any moves with this stock for the time being.

To stay on top of my latest stock rankings, consider subscribing to my Turner Analytics database. If you would like a more managed portfolio of stocks, consider subscribing to Signal Investor. Or if you are looking for shorter-term trades, Perfect 10 Trader may be the right service for you.



Mike Turner 
Turner Trends

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