Research on Starbucks' Investment Strategy Based on P/E, EV/EBITDA and P/S Methods

Abstract

With the development of society, investors have begun to realize the paramount significance of investing. The majority of investors prefer to know more about brands they are familiar with, like Starbucks, a worldwide brand. However, whether it is worth investing in Starbucks is unsure. Consequently, this study used three methods (P/E, EV/EBITDA and P/S) to make an analysis of the investment strategy of Starbucks. There are two findings in this study. Firstly, four comparable companies should be chosen and then use the three methods, respectively, to get the average fair value of Starbucks. Secondly, by comparing the up-to-date stock price with the value calculated, it is found that the value obtained by all approaches is smaller than that shown on the website. Consequently, Starbucks is undervalued. As time goes by, if investors invest in Starbucks at this time, the stock price might go up to its fair value, bringing investors considerable revenue. Thus, it suggests that this paper helps investors get an optimal investment strategy for Starbucks. In addition, Starbucks will also benefit from this paper due to the detailed description of stock evaluation.