SBUX

Financial health: Fair5.5/10

4 strengths, 3 concerns. Weakest points: current ratio, return on equity, payout ratio.

• Debt to equity: -1.73 (Strong, benchmark < 0.5) — Debt of -1.73x equity is conservative against the 0.5x benchmark. It has been broadly flat over the last 4 years.
• Net debt vs cash flow: 2.5y (Strong, benchmark < 4 years) — Net debt of $9.4B is 2.5x annual free cash flow — about 3 years of cash flow to repay.
• Current ratio: 0.76 (Concern, benchmark > 1.5) — Short-term assets cover only 0.76x short-term liabilities — below 1.0, meaning bills due this year exceed the assets on hand to pay them. It has been broadly flat over the last 4 years.
• Return on equity: -33.0% (Concern, benchmark > 15%) — Earns -33.0% on shareholder equity, well short of the > 15% mark.
• Gross margin: 22.1% (Watch, benchmark > 40%) — Keeps 22.1% of revenue after the direct cost of sales, short of the > 40% mark.
• Net margin: 6.7% (Watch, benchmark > 10%) — Turns 6.7% of revenue into profit, short of the > 10% mark.
• Free cash flow: $3.7B (Strong, benchmark positive) — Generated $3.7B of free cash flow after capital spending. It has been broadly flat over the last 4 years.
• Revenue growth: 1.9% (Watch, benchmark > 10%) — Revenue changed 1.9% year on year, short of the > 10% mark.
• Earnings growth: 36.1% (Strong, benchmark > 10%) — Earnings changed 36.1% year on year, comfortably past the > 10% mark.
• Payout ratio: 111.8% (Concern, benchmark < 60%) — Pays out 111.8% of earnings as dividends — above the level usually considered sustainable.