SBUX

Financial health: Weak3/10

2 strengths, 6 concerns. Weakest points: net debt vs cash flow, current ratio, return on equity and 3 more.

• Debt to equity: -1.99 (Strong, benchmark < 0.5) — Debt of -1.99x equity is conservative against the 0.5x benchmark. It has improved over the last 4 years.
• Net debt vs cash flow: 5.2y (Concern, benchmark < 4 years) — Net debt of $12.6B is 5.2x annual free cash flow — about 5 years of cash flow to repay.
• Current ratio: 0.72 (Concern, benchmark > 1.5) — Short-term assets cover only 0.72x 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: -22.9% (Concern, benchmark > 15%) — Earns -22.9% 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: 5.0% (Concern, benchmark > 10%) — Turns 5.0% of revenue into profit, well short of the > 10% mark.
• Free cash flow: $2.4B (Strong, benchmark positive) — Generated $2.4B of free cash flow after capital spending. It has been broadly flat over the last 4 years.
• Revenue growth: 2.8% (Watch, benchmark > 10%) — Revenue changed 2.8% year on year, short of the > 10% mark.
• Earnings growth: -50.6% (Concern, benchmark > 10%) — Earnings changed -50.6% year on year, well short of the > 10% mark.
• Payout ratio: 149.3% (Concern, benchmark < 60%) — Pays out 149.3% of earnings as dividends — above the level usually considered sustainable.