Returns Soar to 7.5%
As of January 24, the Starbucks year-to-date return was 7.5% compared to an average return of 4.9% among its rivals, some of which are listed in the chart below.
The companies listed above are Starbucks’s (SBUX) closest competitors. Looking ahead to the next 12 months, the average price-to-earnings ratio, or PE, for these companies is 24.4x. For the last 12 months, the average PE was 27.7x . The market anticipates that earnings will be higher for this group over the next one-year period.
Comparing the Starbucks next-12-month PE of 27x with the industry average 24.4x may suggest that the company is overvalued and expensive. But keep in mind that the industry average is pulled down by McDonald’s (MCD) and Yum! Brands (YUM), which offer fast food, breakfast, and coffee products. The fast-food sector is losing its market share to fast-casual restaurants.
Restaurant stocks fall under the consumer discretionary sector and are components of the Consumer Discretionary Select Sector SPDR Fund (XLY). This ETF had a year-to-date return of 1%.
Visit the Market Realist Restaurants page to learn more about the industry.
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