Starbucks (SBUX): fair value

Fair-value band

The normal range for this name runs from $73 (cheap) to $103 (expensive); it is now priced at $98.

That is 1.0σ above this name's own normal premium.

Is Starbucks undervalued?

Fair, relative to its own history. Starbucks trades at $98, 5% above the fair value this model estimates, but it has habitually traded 6% below fair value, and today's gap is 1.0σ above that norm, within the range it normally trades in, so the verdict is Fair: priced normally for itself, not necessarily fairly valued.

Diligence checklist

6 pass · 2 fail · 3 no data

• PASSCash actually collected from profit, last 12 months: 182%XBRL · Starbucks gets $1.82 of real cash for every $1 of reported profit which means profits are real and not just numbers on paper. That's a good sign.
• FAILGap between paper profit and real cash: -9.7%XBRL · Starbucks collected more cash than it booked as profit, by 9.7% of everything it owns. That is the conservative direction, but it is far enough past my 5% line to flag: a gap this wide usually means something large and non-cash is running through the earnings, and I want to know what it is before I trust the profit figure.
• PASSDebt compared to one year of cash earnings: 2.51xXBRL · It would take 2.51 years of earnings to clear what Starbucks owes, net of the cash it holds. My limit for a name I would buy is three years, so this passes, though the balance sheet is doing more of the work than it does at the top of this list.
• PASSHow much more it earns on capital than that capital costs: +29.88ppXBRL · Return on capital is far higher than what that capital costs, so every dollar Starbucks puts to work turns into much more than a dollar of value. A +30 point gap is wide: reinvesting is genuinely worth doing here, which is what makes growth valuable rather than merely expensive. The gap is no wider than it was at the start of the window.
• PASSStock sold by executives and directors on the open market, last 6 months: $0.0MEDGAR · Nobody running Starbucks sold a single share on the open market in the last 6 months. That is the alignment I want: the people with the most information about the business are keeping their money in it. A further $1.6M went out under pre-planned 10b5-1 schedules, which I don't count: those sales are set up months ahead and say nothing about what management thinks today. Options being exercised, and shares held back to cover the tax on them, are not sales and I don't count them either.
• FAILHow long the CEO has run this company: 2.1 yearsTEXT · Starbucks's chief executive took the job on September 9, 2024, 2.1 years ago. I want a full cycle at the company, which I take as 5 years, before a management record tells me anything: a short run has not yet been tested by a bad year. filing ↗
• N/AProfit margin held up during the last sales slump: n/aXBRL · There's no revenue downturn in Starbucks's filed record, or gross profit isn't tagged, so this test has nothing to measure. It needs a bad patch to look at: without one, whether customers would stay through a price rise is untested rather than proven.
• PASSNormal profit margin across a full business cycle: FCF margin 10.4% vs 9.8% medianXBRL · Starbucks's current cash margin (10.4%) is a bit above its long-run average (9.8%). This is a mild warning rather than a problem: don't assume today's good margin lasts forever. My valuation grows the long-run average, not the temporarily high figure. Across the window the margin ran between -4.8% in April 2023 and 24.7% in March 2024.
• N/AHow much of the stock trades on an average day: $816MMARKET · Starbucks trades about $816M of stock a day. Taking a fifth of that for ten sessions, I could build or exit roughly $1,633M without leaning on the price. There's no pass or fail here because the answer depends on how big a position I'd actually want to take.
• N/AShare of revenue from its single biggest customer: not establishedTEXT · I fetched and read Starbucks's November 14, 2025 10-K but found no sentence about customer concentration. That isn't the same as the filing saying there is none: it may simply be worded in a way my search doesn't catch. Read Item 1 and the concentration-of-risk note yourself before trusting this row. filing ↗
• PASSWhether the company switched auditors in the last 2 years: noneEDGAR · Companies sometimes switch accounting auditors right before something bad is uncovered which can be a warning sign. Starbucks hasn't changed auditors in the last 2 years, so there's no such red flag here.