Q: How long can Starbucks stay hot?
A: Starbucks is best known for its piping hot coffee. But investors know it as a great - if not richly valued - stock.
Gene J. Puskar, AP
In this May 31, 2014 photo, a woman holds a coffee drink outside a Starbucks in more
In this May 31, 2014 photo, a woman holds a coffee drink outside a Starbucks in downtown Chicago. Starbucks is raising prices on some of its drinks by 5 cents to 20 cents starting next week, and customers can also soon expect to pay $1 more for the packaged coffee it sells in supermarkets. Prices for medium and large brewed coffees, which are known as Grande and Venti, respectively, will go up between 10 cents and 15 cents in most U.S. markets, the company said. (AP Photo/Gene J. Puskar) ORG XMIT: NYBZ159 less
Shares of the coffee giant have been a stellar investment for long-term investors. The stock is up nearly 340% over the past five years, a strong showing
relative to the 77% gain in the Standard & Poor's 500 during the same period. The stock also yields 1%, which is an added kicker, although that is half of the yield of the market.
The company continues to deliver. Starbucks late Thursday reported an adjusted quarterly profit of 43 cents a share, which matched expectations. Revenue jumped 18% from the same year-ago period. Starbucks is not a cheap stock, though, as it trades for 35 times diluted earnings the past year. That's well above the market's multiple of roughly 20 times earnings. Starbucks is growing more rapidly than the market, explaining why Wall Street analysts on average rate the stock a "buy." Starbucks is expected to deliver average annual compound growth of 18%. The company's growth plans continue to keep investors interested, but analysts see shares worth $63.96 in 18 months, which is just 2% upside from Thursday's close of $62.50.
USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at firstname.lastname@example.org or on Twitter @mattkrantz.
Category: Personal Finance