(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Starbucks Corp.'s (SBUX) is one of the great corporate growth stories of the past decade. But the seven-fold rise in its stock during that period, more than triple the pace of the S&P 500, conceals a troublesome trend for investors. The stock has essentially gone nowhere in the past three years and is down sharply from its 2017 record high, and it may fall even further. 

There are several forces behind this decline. Once a fast-growth company, Starbucks' same-store sales are steadily slowing while its supposed growth market of the future—Asia—is putting up unimpressive growth numbers.

Given all this, the company's shares are expensive when comparing its stock to other names in the group and the broader market, and that does not bode well for a slowing growth story. Additionally, the premium investors are willing to pay for shares has fallen significantly. Since October 2015, the stock's forward earnings multiple has fallen from a level of about 33 to just 23, a drop of 33%, while the stock’s price has declined by only 3.25%. In what seems to be a loud message that investors are no longer willing to pay a significant premium for shares.

SBUX Chart

SBUX data by YCharts

Slowing Sales

The most troublesome sign for Starbucks has been the slowing of its comparable consolidated sales, which for the fiscal second quarter was at 2%, down from 3% from the same period a year ago, and from 6% in the second quarter of 2016. In fact, the comparable consolidated sales have been slowing consistently now since the first quarter of 2016, and to this point, there are no signs of that trend turning higher. Meanwhile, the number of total transactions fell by 1% in the fiscal second quarter for the second year in a row.

Asia Slows Too

Growth in Asia has flattened with

 for the second quarter at 3% for the third year in a row. Since the second quarter of 2015, same-store comparable sales have slowed materially, falling from 12%. Even more worrisome, the number of transactions in Asia slowed to zero in the quarter, down from 1% growth the previous year and 10% in 2015.

Contracting Multiple

The slowing consolidated store growth has plagued Starbucks shares for the past few years. Investors seem to doubt whether the significant earnings growth of 24% in 2018 will last. When adjusting Starbucks shares for 2018 growth, it trades with a PEG ratio of about 1.09, a cheap level. But analysts' forecasts show growth slowing in 2019 to only 11%, and when adjusting the stock for future growth, the PEG ratio jumps to a pricey 1.9. 

SBUX PE Ratio (Forward) Chart

Starbucks is currently trading at roughly 23 times 2018 earnings of $2.50 per share versus an S&P 500 that is trading at 18.5 times 2018 estimates of $147.27, according to data provided by S&P Dow Jones Indices. It is even more expensive than other restaurant chain stocks such as McDonald's, which is trading at 21, and Darden Restaurants at 18 and,  until recently, Dunkin Donuts, as the multiple investors are willing to pay for Starbucks continues to decline. 

The slowing comparable sales have been a significant problem for Starbucks stock since 2015. As of now, the promise for significant growth in Asia is bright. But has yet to materialize, and that is a substantial problem for the stock going forward. 

Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.