Stock Analysis on Net
Stock Analysis on Net

Starbucks Corp. (NASDAQ:SBUX)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Starbucks Corp., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 13.65%
01 FCFF0 2,877,930
1 FCFF1 2,967,944 = 2,877,930 × (1 + 3.13%) 2,611,364
2 FCFF2 3,117,347 = 2,967,944 × (1 + 5.03%) 2,413,285
3 FCFF3 3,333,693 = 3,117,347 × (1 + 6.94%) 2,270,705
4 FCFF4 3,628,599 = 3,333,693 × (1 + 8.85%) 2,174,632
5 FCFF5 4,018,761 = 3,628,599 × (1 + 10.75%) 2,119,096
5 Terminal value (TV5) 153,344,599 = 4,018,761 × (1 + 10.75%) ÷ (13.65% – 10.75%) 80,858,737
Intrinsic value of Starbucks Corp. capital 92,447,819
Less: Debt (fair value) 14,968,200
Intrinsic value of Starbucks Corp. common stock 77,479,619
 
Intrinsic value of Starbucks Corp. common stock (per share) $68.14
Current share price $83.41

Based on: 10-K (reporting date: 2025-09-28).

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Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Starbucks Corp., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 94,845,511 0.86 15.33%
Debt (fair value) 14,968,200 0.14 3.05% = 3.97% × (1 – 23.07%)

Based on: 10-K (reporting date: 2025-09-28).

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 1,137,100,000 × $83.41
= $94,845,511,000.00

   Debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (25.90% + 24.30% + 23.60% + 22.40% + 21.60% + 20.60%) ÷ 6
= 23.07%

WACC = 13.65%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Starbucks Corp., PRAT model

Microsoft Excel
Average Sep 28, 2025 Sep 29, 2024 Oct 1, 2023 Oct 2, 2022 Oct 3, 2021 Sep 27, 2020
Selected Financial Data (US$ in thousands)
Interest expense 542,600 562,000 550,100 482,900 469,800 437,000
Net earnings attributable to Starbucks 1,856,400 3,760,900 4,124,500 3,281,600 4,199,300 928,300
 
Effective income tax rate (EITR)1 25.90% 24.30% 23.60% 22.40% 21.60% 20.60%
 
Interest expense, after tax2 402,067 425,434 420,276 374,730 368,323 346,978
Add: Cash dividends declared 2,785,000 2,625,000 2,474,600 2,293,500 2,697,200 1,436,600
Interest expense (after tax) and dividends 3,187,067 3,050,434 2,894,876 2,668,230 3,065,523 1,783,578
 
EBIT(1 – EITR)3 2,258,467 4,186,334 4,544,776 3,656,330 4,567,623 1,275,278
 
Current portion of long-term debt 1,498,900 1,248,900 1,818,600 1,749,000 998,900 1,249,900
Long-term debt, excluding current portion 14,575,900 14,319,500 13,547,600 13,119,900 13,616,900 14,659,600
Shareholders’ deficit (8,096,600) (7,448,900) (7,994,800) (8,706,600) (5,321,200) (7,805,100)
Total capital 7,978,200 8,119,500 7,371,400 6,162,300 9,294,600 8,104,400
Financial Ratios
Retention rate (RR)4 -0.41 0.27 0.36 0.27 0.33 -0.40
Return on invested capital (ROIC)5 28.31% 51.56% 61.65% 59.33% 49.14% 15.74%
Averages
RR 0.07
ROIC 44.29%
 
FCFF growth rate (g)6 3.13%

Based on: 10-K (reporting date: 2025-09-28), 10-K (reporting date: 2024-09-29), 10-K (reporting date: 2023-10-01), 10-K (reporting date: 2022-10-02), 10-K (reporting date: 2021-10-03), 10-K (reporting date: 2020-09-27).

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2025 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 542,600 × (1 – 25.90%)
= 402,067

3 EBIT(1 – EITR) = Net earnings attributable to Starbucks + Interest expense, after tax
= 1,856,400 + 402,067
= 2,258,467

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [2,258,467 – 3,187,067] ÷ 2,258,467
= -0.41

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 2,258,467 ÷ 7,978,200
= 28.31%

6 g = RR × ROIC
= 0.07 × 44.29%
= 3.13%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (109,813,711 × 13.65% – 2,877,930) ÷ (109,813,711 + 2,877,930)
= 10.75%

where:

Total capital, fair value0 = current fair value of Starbucks Corp. debt and equity (US$ in thousands)
FCFF0 = the last year Starbucks Corp. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Starbucks Corp. capital

FCFF growth rate (g) forecast

Starbucks Corp., H-model

Microsoft Excel
Year Value gt
1 g1 3.13%
2 g2 5.03%
3 g3 6.94%
4 g4 8.85%
5 and thereafter g5 10.75%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 3.13% + (10.75% – 3.13%) × (2 – 1) ÷ (5 – 1)
= 5.03%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 3.13% + (10.75% – 3.13%) × (3 – 1) ÷ (5 – 1)
= 6.94%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 3.13% + (10.75% – 3.13%) × (4 – 1) ÷ (5 – 1)
= 8.85%