Starbucks may be one of the most well known brands in the world, but does it still represent a wise investment — as especially as the volatility of coffee crops around the world is causing jitters in even the largest and most robust of coffee shops? Let?s do a business valuation analysis of this well known cafe.
Starbucks: A Strong Investment Story Still
According to Profit Confidential, the answer is yes — all valuation market approaches point to Starbucks being a great investment. The magazine points out that Starbucks is less about the coffee than it is about the branding, and it?s the incredibly strong branding effort that is at the root of their success. Starbucks, despite being a global company with chains in nearly every major city, has still managed to garner a reputation of conversation, culture and class.
Profit Confidential points out that nothing about the setup of a Starbucks is accidental. Round tables, for instance, are not happenstance or the result of a good deal at IKEA — Starbucks opts for these tables because they encourage people to interact and sit with each other, creating an inviting atmosphere. Starbucks also managed to hone in on the large number of people looking for a ?home away from home,? or another place to do work — although WiFi is fairly ubiquitous among coffee shops now, Starbucks was one of the first to offer it as a standard.
Business Valuation Analysis: The Nitty Gritty Numbers
For anyone looking for hard numbers to justify buying Starbucks stocks, however, there are a few less subjective factors at play. For one, Starbucks managed to open 528 new stores in Q1 thanks to increased international push into the China and Asia Pacific region (Starbucks has essentially reached saturation point in North America). The SBUX stock can also thank its loyalty members for another lift to its stock; the loyalty program grew by 23% this quarter, and these members are key to improving same-store sales. Loyalty members spent an incredible $1.9 billion in 2015.
Finally, operating margins increased by 60 basis points. In other words, Starbucks is managing to make more profit from each dollar of revenue they receive. How? Like many companies, Starbucks relies on a number of business appraisal services, among other tools.
Will you be buying into Starbucks? stocks after taking a look at their business valuation report? All signs point to this being a great investment opportunity. Helpful sites.