Last update on 2024-06-14

Starbucks (SBUX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 9/9)

Starbucks (SBUX) scores 9/9 in Piotroski F-Score for 2023, reflecting impressive financial strength in profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 9

We're running Starbucks (SBUX) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score analysis for Starbucks (SBUX) showcases the company’s strong financial position with an impressive score of 9 out of 9. This score is achieved by meeting criteria in profitability, liquidity, and operational efficiency. Starbucks has demonstrated consistent profitability with a positive net income and growing return on assets (ROA). The cash flow from operations exceeds net income, indicating solid cash-based earnings. While the company's leverage slightly increased, other liquidity metrics like the current ratio show modest improvements. Additionally, gross margin and asset turnover ratios have increased, reflecting better efficiency in operations.

Insights for Value Investors Seeking Stable Income

Based on this comprehensive Piotroski F-Score analysis, Starbucks represents a strong and potentially undervalued investment opportunity. The solid financial health and efficient management of operations suggest that it could be a worthwhile stock to consider for your portfolio. However, keep in mind that the leverage has increased slightly, which should be monitored closely. Overall, Starbucks presents a favorable profile for investors seeking steady growth and financial stability.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Starbucks (SBUX)

Company has a positive net income?

Net Income is a company's total earnings after all expenses have been deducted from total revenue. It indicates profitability.

The reported Net Income of Starbucks (SBUX) for 2023 is $4,124,500,000, which is positive. Over the last 20 years, Starbucks has shown a consistent ability to generate net income, despite a few dips. For instance, 2008 and 2013 were significantly lower, likely influenced by the economic downturn and other operational challenges. Nevertheless, Starbucks has managed to bounce back strongly, reaching its highest net income in recent years. This positive trend underscores the company's financial health and its effectiveness in managing operations and costs. Therefore, for the Net Income criterion, Starbucks is awarded 1 point.

Company has a positive cash flow?

Cash Flow from Operations (CFO) refers to the cash generated by a company's regular operating activities. It is a key measure of a company's financial health and its ability to generate cash to fund its operations.

Starbucks (SBUX) reported a CFO of $6,008,700,000 in 2023. This is a positive cash flow from operations, indicating that the company successfully generated cash from its core business activities. Historically, Starbucks has shown a general upward trend in its CFO, almost quadrupling from $1,252,670,800 in 2003 to the current figure, with significant annual increases particularly noted in the most recent years. This positive trend is favorable as it suggests robust operational performance and efficient management of assets and liabilities.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures how efficiently a company is able to generate profit from its assets. For Starbucks, a higher ROA indicates improved efficiency in utilizing its assets to generate profits. Comparing ROA over years helps identify trends in financial performance.

Starbucks posted a ROA of 0.1437 in 2023 compared to 0.1105 in 2022. This increase from 11.05% to 14.37% is a positive trend, indicating better asset utilization and operational efficiency. Over the last 20 years, Starbucks' ROA exhibits considerable fluctuations but shows overall resilience, especially when compared to the industry median, which varied but maintained higher levels. Specifically, the industry median ROA seen in the given span shows more stability but Starbucks' recent upward trend is encouraging and speaks to effective strategic management, capturing an increased market share or improving margin efficiencies.

Operating Cashflow are higher than Netincome?

Criterion evaluates whether operating cash flow is higher than net income. Highlights cash-based profitability over net income, showcasing financial health.

For FY 2023, Starbucks' operating cash flow stood at $6,008.7 million, surpassing the net income of $4,124.5 million. This yields a point in the Piotroski score (1/1), reflecting strong cash-based earnings. Analyzing historical data, Starbucks frequently demonstrated higher operating cash flow compared to net income in the last 20 years. This trend underscores a robust ability to generate cash, mitigating risk associated with earnings management and showcasing a high-quality earnings profile.

Liquidity of Starbucks (SBUX)

Leverage is declining?

Change in Leverage examines if a company's leverage ratio has decreased from the previous year. This criterion checks financial stability.

In 2022, Starbucks had a leverage of 0.7375 which increased to 0.7292 in 2023, thus, this trend reveals an increase in leverage. An increased leverage generally reflects higher dependence on debt financing and raises caution regarding financial stability. For Starbucks, given the additional data that showcases how leverage has evolved over two decades – from nearly zero in the early 2000s to gradually peaking in recent years – maintaining or further increase in leverage might be considered alarming. Accordingly, a score of 0 is assigned since the leverage did not decrease.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with short-term assets. It is crucial for gauging liquidity and overall financial health.

Comparing the Current Ratio of 0.7815 in 2023 with 0.7669 in 2022 for Starbucks, we see a marginal increase. This slight uptick, setting the point to 1, implies a stable but modest improvement in liquidity. Historically, Starbucks had higher Current Ratios, sometimes peaking near 2.2 (2018), showing considerable fluctuations. Although, in the broader context of the coffee industry, the company's ratio remains close to the industry median of 0.777 in 2023, indicating consistency with industry trends. Nonetheless, the small increase is a positive sign, pointing that Starbucks is incrementally strengthening its ability to cover short-term obligations.

Number of shares not diluted?

Change in Shares Outstanding measures whether a company has issued more shares or repurchased share from the market, reflecting its capital structure strategy.

Based on the provided numbers, Starbucks had 1.1479 billion outstanding shares in 2022, which slightly increased to approximately 1.1468 billion shares in 2023. Therefore, outstanding shares increased year-over-year, resulting in a score of 0 for this criterion. Generally, a decrease in shares outstanding is considered positive as it can increase EPS (earnings per share) and indicates strong cash liquidity for repurchases. However, the slight increase observed here is minimal and doesn't represent a substantial dilution for shareholders.

Operating of Starbucks (SBUX)

Cross Margin is growing?

Gross margin represents the percentage of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells. It is crucial because it reflects the core profitability of a business. A healthy and increasing gross margin indicates strong pricing power and efficient cost management.

In the case of Starbucks (SBUX), the gross margin increased from 0.2596 in 2022 to 0.2737 in 2023, which signifies an improvement and subsequently scores 1 point in the Piotroski Analysis. This upward trend in gross margin is a positive sign as it suggests Starbucks has been more effective in managing its production and ingredient costs relative to its sales. An examination of the historical data reveals that Starbucks experienced fluctuations in its gross margin over the past two decades. The industry median gross margin for 2023 stands at 0.3206, higher than Starbucks’ latest figure, indicating potential room for improvement in cost management and pricing strategies by the company. However, the increment from 2022 still reflects positively on Starbucks' operational efficiencies.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's ability to generate sales from its assets. It's calculated as Sales divided by Total Assets.

Comparing Starbucks’ Asset Turnover ratios of 1.253 in 2023 and 1.0864 in 2022, we observe an increase. This means that in 2023, Starbucks was more efficient in using its assets to generate sales than in 2022. The ratio shows a positive trend, reflecting improved operational efficiency. Historically, the data indicates fluctuations with peaks around 2004-2007, followed by subsequent declines, most notably during 2020, likely due to the pandemic impact. An increase now suggests a recovery and positive operational leverage. Thus, this trend is beneficial, earning a point.