Analysis on the Value of Enterprise Investment of Starbucks and Luckin

Abstract

Since the COVID-19 pandemic, the black swan event has dealt a severe blow to the global economy and dramatically reshuffled the coffee industry. It is crucial to consider the way to survive for many coffee companies. Based on the current situation of Chinese coffee market, this paper uses DCF model to conduct valuation analysis on two representative enterprises, Starbucks and Luckin. Starbucks, as the world's leading brand of freshly ground coffee, has a sound operating and financial position. Luckin, as an emerging coffee company, is expanding rapidly with increasing sales and strong profitability in the future. Based on the discounted cash flow and the calculation of residual value, this study finally obtains the internal earnings per share, which help investors make the decision whether to invest. According to the analysis, Starbucks’ stock is currently overvalued and not a good choice to buy. Luckin's stock is suitable for medium - to long-term investment, and investors with a certain risk tolerance to buy. These results shed light on guiding further exploration of the future development of coffee enterprises and the investment direction of investors.