Starbucks Corporation (SBUX): what the price requires

At today's price, Starbucks Corporation (SBUX) is priced for today's economics sustained for ~6.0 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-13 · Source: https://boothcheck.com/report/SBUX

Headline

Field	Value
Ticker	SBUX
Company	Starbucks Corporation
Current price	$106.95/sh
Composition	Beverage 61% / Food 19% / Other 20%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin needed	8.3%
Operating margin today	8.6%
Margin compression implied	-0.3pp
Must persist for	6.0y
Multiple paid	34x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 8.7% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.9 years.

How unusual the bet is: high

Reference	Value
vs own history	+0.59σ
cohort percentile (of 210 peers)	88
sustained it ~6 years at this level	26%
implied end-window share	0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	—	0	—
Earnings	—	0	—
Relative	1.90x	2	expensive
Growth	—	0	—

Families that call it expensive: Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.

Per-Model Detail (n=2)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	$54.85	1.95x	no	FCF base $2.8B, growth 6% (input: historical growth), terminal g 4.0%, WACC 7.7%, 6yr projection
DCF Exit Multiple	Growth	$112.52	0.95x	no	Exit EV/EBITDA: 30.0x / 32.0x / 34.0x (bear / base = today's held flat / bull), 6yr
Relative Valuation	Relative	$64.25	1.66x	yes	P/E 44.13x (blended: sector 28x + trailing (TTM) 82x), scenarios: 36.9x / 44.1x / 51.4x (bear / base = sector held flat / bull), EV/EBITDA 22.19x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	—	—	no	—
Two-Stage Excess Return	Asset	—	—	no	—
Discounted Future Market Cap	Growth	$98.05	1.09x	no	Rev $38.5B, growth 6% (input: historical growth; tapered), Terminal P/S: 2.7x / 3.2x / 3.7x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/E	Relative	—	—	no	—
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	$19.63	5.45x	no	Normalized EBIT (5y avg op income, one-time charges added back) $4.98B × (1−30%) / WACC 7.7% → EPV (no growth)
Residual Income	Asset	—	—	no	—
Graham Number	Asset	—	—	no	—
EV/EBITDA Relative	Relative	$50.11	2.13x	yes	EBITDA $4.65B × sector EV/EBITDA 18.0x
FCF Yield	Earnings	$2.69	39.76x	yes	FCF $2725.9M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF Yield	Earnings	$0.01	10695.00x	yes	SBC-adj FCF $2.37B (FCF $2.73B − SBC $0.36B) capitalized at Kₑ (excluded from median)
Ben Graham Formula	Earnings	$1.10	97.23x	yes	EPS $1.31 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	$151.44	0.71x	no	Revenue $38.47B × sector P/S 4.5x
PEG Fair Value	Relative	—	—	no	—
Earnings Yield	Earnings	$14.16	7.55x	no	EPS $1.31 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$14.9b
Net debt / NOPAT (after-tax)	6.53x
Net debt / operating income (pre-tax)	4.58x
Interest coverage	6.0x
Share count CAGR (buyback)	-0.2%
Burning cash	no

Bullet Takeaways

At about $100.61 (as of June 27, 2026) the market pays roughly 33x company-wide operating income, a multiple at the very top of the restaurant peer distribution, well beyond the upper quartile. The price is a demanding bet on the turnaround restoring margins.
Trailing operating margin is depressed near 7.6%, well below Starbucks' historical mid-teens, so the high multiple is measured against turnaround-trough earnings. The most recent quarter showed margin recovering to 9.4%.
The turnaround is showing real traction: global comparable sales rose 6.2% with US transactions up 4.3%, and management raised full-year guidance. The price already prices much of that recovery in.

Bull Case

Lead with the bear case, because it is the loud one: at roughly 33x operating income Starbucks trades at the very top of the restaurant peer group, well beyond the upper quartile, and the trailing operating margin is only about 7.6%, far below the mid-teens the company earned in better years. On those facts alone the stock looks expensive on depressed earnings, a dangerous combination. The bull case is whether the data has begun to overturn that, and the most recent quarter says it has.

The turnaround under CEO Brian Niccol delivered its first clear inflection. Global comparable sales rose 6.2%, ahead of the roughly 4% expected, US comparable sales climbed 7.1% on a 4.3% increase in transactions, the second straight quarter of US traffic growth, and consolidated operating margin improved to 9.4%, up about 110 basis points (web research). Niccol called it "the turn in our turnaround," with growth on both the top and bottom line for the first time in more than two years (web research). Traffic growth matters more than price for a retailer, because it signals the brand is winning customers back rather than squeezing the ones it has, and the strategy driving it, cutting discounts, improving cafe operations, adding menu items, and reintroducing seating, is exactly the operational fix the depressed margin needed. The FY2025 10-K describes the operating-model work directly, "empowering coffeehouse leaders to take ownership" of the store model to "enhance the customer experience and drive future transaction growth" (accession 0000829224-25-000114).

The brand and scale are the durable advantages under the recovery. Starbucks is the dominant premium-coffee brand globally, with pricing power that lets it sell "high-quality arabica coffee, which typically trades at a premium" and pass through commodity cost (accession 0000829224-25-000114). Management raised full-year fiscal 2026 guidance, now expecting global and US comparable sales to grow at least 5%, up from 3%, and adjusted EPS of $2.25 to $2.45, up from $2.15 to $2.40 (web research). The dividend yields about 2.5% and the share count is essentially flat. If the margin continues recovering toward its historical range as comps and traffic build, the earnings base the 33x multiple is measured against grows into the price, which is the bet a buyer here is making: not that Starbucks reinvents itself, but that a great brand restores the margins it temporarily lost.

Bear Case

The competitive disruption is most acute in China, where the brand that built the category is now fighting cheaper, faster local rivals. Luckin Coffee has overtaken Starbucks in Chinese store count and undercuts it aggressively on price, while a wave of local chains competes on convenience and value in a market that was supposed to be Starbucks' second growth engine. The FY2025 10-K acknowledges "direct competition from large competitors in the quick-service restaurant sector and the ready-to-drink coffee beverage market, in addition to both well-established and start-up companies in many international markets" (accession 0000829224-25-000114). In China specifically, a premium-priced foreign brand is structurally disadvantaged against local players willing to win share at thin margins, and a stalled or shrinking China business removes a chunk of the growth the 33x multiple assumes.

The domestic recovery, while real, is being bought with investment that pressures the very margin it needs to restore. Reintroducing seating, adding labor hours to improve service, and pulling back on discounts to protect the brand all cost money in the near term, and the trailing operating margin near 7.6% reflects that the turnaround spend is running ahead of the revenue benefit. The price assumes operating growth held near its ceiling for almost six years, but only about 27% of comparable companies historically sustained that pace for that long. If US comp momentum fades after the easy comparisons, or if labor and cafe-investment costs stay elevated, the margin recovery the price requires slows.

The input cost and balance sheet are the structural pressures underneath. Coffee is a volatile commodity: the 10-K warns the "availability and price of coffee beans and other commodities are highly volatile," and the arabica premium "varies based on supply and demand" (accession 0000829224-25-000114). A spike in green-coffee prices hits the cost line directly when the company is trying to expand margin. Meanwhile the balance sheet carries about $14.9 billion of net debt, roughly 5x trailing operating income, and negative book equity from years of buybacks, so there is no accounting equity cushion and leverage amplifies any earnings disappointment. The price is a bet that the turnaround fully restores historical margins, and the gap between $100 and a $50-to-62 peer-multiple mark is what is at risk if it only partly does.

Valuation

The price is read on a whole-company basis against operating income. At roughly 33x company-wide operating income the inversion solves to operating growth held near the 25% self-funding ceiling for about six years, computed at an 8.8% cost of capital. The multiple sits at the very top of the restaurant peer distribution, well beyond the upper quartile, so the label is high: a demanding bet on continued execution. Crucially, the trailing operating income the multiple is measured against is depressed by the turnaround, margin near 7.6% versus a historical mid-teens, so part of the apparent richness is trough earnings rather than a permanently stretched price.

The X-ray is thin because three distress signals, negative book equity, negative retained earnings, and an Altman reading, all artifacts of heavy buybacks and the earnings trough, gate off the DCF, future-market-cap, and earnings-power methods. What survives is the relative family: the relative method marks $62 and the EV/EBITDA relative method $50, both well below the $100 price, while the FCF-yield methods produce low single-digit marks on depressed free cash flow.

The honest read is that no standard frame reaches the current price, so the buyer is underwriting a full margin restoration that the methods cannot yet see in the trailing numbers. The variable that settles it is the turnaround's margin trajectory: if operating margin climbs back toward the mid-teens as comps and traffic build, the earnings grow into the multiple; if the recovery stalls in China or at home, the peer-multiple marks near $50 to $62 are the more honest anchor.

Catalysts

The turnaround inflection is the defining catalyst. In fiscal second-quarter 2026 global comparable sales rose 6.2% (versus about 4% expected), US comparable sales climbed 7.1% on a 4.3% transaction increase, the second straight quarter of US traffic growth, and consolidated operating margin improved to 9.4%, up about 110 basis points, the first quarter of top- and bottom-line growth in more than two years (web research). Each quarter's comp and, more importantly, transaction trend is the readout on whether the recovery is durable.

The raised guidance is the supporting catalyst. Starbucks now expects global and US comparable sales to grow at least 5% in fiscal 2026, up from 3%, and adjusted EPS of $2.25 to $2.45, up from $2.15 to $2.40 (web research). The margin trajectory back toward historical levels is the number that justifies or undercuts the high multiple.

The risk catalysts are China and coffee costs. The competitive pressure from Luckin and local rivals in China, and the volatility of green-coffee prices that the 10-K flags as highly variable, are the external variables to watch (accession 0000829224-25-000114). Watch US and China comparable sales and transactions, the operating-margin recovery, green-coffee cost trends, and execution on the cafe-operations and menu initiatives driving the traffic turn.

Sources: Starbucks Q2 fiscal 2026 results (cnbc.com, about.starbucks.com, sec.gov); Starbucks Q2 2026 earnings call (fool.com, seekingalpha.com, theglobeandmail.com).

Peer Cohorts (Per Segment, With Filing Citations)

Core business (reported)

MCD (McDONALD’S CORPORATION)
(no filing in the citation store)
CMG (CHIPOTLE MEXICAN GRILL, INC.)
(no filing in the citation store)
YUM (YUM! BRANDS, INC.)
(no filing in the citation store)
QSR (RESTAURANT BRANDS INTERNATIONAL INC.)
(no filing in the citation store)
YUMC (Yum China Holdings, Inc.)
(no filing in the citation store)
DRI (DARDEN RESTAURANTS, INC.)
(no filing in the citation store)
ARCO (Arcos Dorados Holdings Inc.)
(no filing in the citation store)
ARMK (Aramark)
(no filing in the citation store)

Methodology Note

Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.