Starbucks Corporation (SBUX) Still Serves Up Hot Growth

Starbucks also faces a tremendous amount of competition worldwide.  Although there aren’t many companies that can match the consumer experience of Starbucks, there are a lot that sell fresh, hot coffee.  McDonald’s Corporation (NYSE:MCD) introduced its premium coffee several years ago and has since expanded into multiple specialty drinks.  McDonald’s has been very good at mimicking Starbuck’s success in offering seasonal coffee drinks.

While this may have stolen some growth from Starbucks on the fringe, it doesn’t appear that McDonald’s has encroached too much on the Starbucks experience.  Starbucks answered the rise in premium “fast-food” coffee when it bought the Seattle’s Best brand.  Seattle’s Best is now sold in fast-food locations such as Burger King Worldwide Inc (NYSE:BKW) and Subway as well as in grocery stores.

The Foolish Bottom Line

Starbucks, though a mature company, hasn’t finished its growth cycle by a long shot. The company has out-innovated other consumer product and retail brands to become a lifestyle company. Starbucks sells great coffee – Yes – but they also sell a great experience.

They are focusing resources toward markets where they are far from saturation. They are also focusing on innovating their product line and distribution in mature markets where it doesn’t make sense to open as many new stores. That focus and innovation is why Starbucks is a core holding for me.

At its current price-to-earnings ratio of 28, shares may be fully valued in the short term.  However, in the long term Starbucks has a long runway for growth.  That’s why I will be adding to my personal position on any pull-backs.  Certainly this is one investors should watch for an opportunity to get in.  Until then, just sit back and enjoy a fresh, hot cup of coffee.

The article Starbucks Still Serves Up Hot Growth originally appeared on Fool.com and is written by Frank Constantino.

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