Reflections – added SBUX to watchlist

Performed some basic fundamental analysis on Starbucks (SBUX) today and really like the strong fundamentals.

However, I consider the current price too high (current price at $57). The TTM PE ratio is 19 which is acceptable but the PE ratio based on 2017 EPS is 28.9 which is high. Additionally, applying a Valuegrowth model (assuming zero future growth, risk-free rate of 3% from US 20yr Treasury yield, Equity Risk Premium of 4%), the intrinsic value per share of the business is at $38 which gives a PE ratio of 19.2 using 2017 EPS. More details of the calculation can be seen on my watchlist page.

May consider initiating a small position when it falls to $48 (down 15% from current prices) and will complete a full position at $38-$40 or lower.


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