Starbucks Passes The Greenblatt’s Magic Formula Filter


  • Starbucks has a high return on tangible capital that improved last fiscal year and is higher than the ratio for the two preceding years.
  • Investors today are purchasing SBUX stock at about a 33% discount as measured by the forward EBIT/EV ratio.
  • The return on tangible capital and the EBIT/EV ratio are two ratios that Joel Greenblatt points to in explaining his success as an investor.

Starbucks coffee sign hanging outside a shop



In this article, we review Starbucks’ (NASDAQ:SBUX) recent financial record using the criteria offered by Mr. Joel Greenblatt in his bestselling book “The Little Book That Still Beats the Market”*. In particular, we review Starbucks’ return on tangible capital and earnings yield

Table 1: Return on Tangible Capital ($ in millions)
2023 2022 2021
Adjusted Operating Income 5779.5 4617.8 4872.1
Tangible Assets 8162.95 8404.1 8299.00
Adjusted Operating Income Return on Tangible Assets 70.80% 54.9% 58.7%

Table 2: Earnings Before Interest Expense (EBIT) and Taxes to Enterprise Value (EV)
SBUX 5 Yr. Avg. % Difference to 5Y Avg.
EBIT/EV (TTM) 5.07% 2.50% -50.65%
EBIT/EV (FWD) 5.27% 3.51% -33.38%

Analyst’s Disclosure: I/we have a beneficial long position in the shares of SBUX either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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