(Note: The author of this fundamental analysis is a financial writer and portfolio manager. He and his clients own shares of SBUX.)

Starbucks Corp. (SBUX) stock continues to be a mystery as to what the market is looking for these days. It's fairly evident that Starbucks is not the super-growth company it once was, but it is still growing. And the stock is relatively cheap when compared to peers such as McDonald's Corp. (MCD). 

The stock has had a nice run since the middle of August 2017, rising by nearly 15 percent, but even that run – as impressive as it sounds – underperformed the S&P 500 by about two percentage points. Over the past 52 weeks, Starbucks shares are flat, while McDonald's has risen by 45 percent, and the S&P 500 Index is up by almost 24 percent. 

Valuation Is Cheap Compared To McDonald's

Starbucks is currently trading at about 23 times fiscal 2018 earnings of $2.51 based on its stock price of $58, at the mid-point of the company's guidance.

When compared to McDonalds, Starbucks is the cheaper option, with McDonald's trading at nearly 25 times 2018 earnings estimates of $7.1. This comes despite Starbucks growing earnings faster and revenue that is expected to increase by almost 10 percent per year through fiscal 2020, versus expectations of McDonald's declining revenue. 

Based on McDonald's earnings multiple, Starbucks shares should be valued at roughly $63. One could argue that Starbucks could trade at a premium to McDonald's given its faster earnings growth rate. Starbucks is expected have positive revenue growth, compared to McDonald's declining revenue forecast. 

MCD Annual Revenue Estimates Chart

Expectations Are Out Of Sorts

But it always comes down to expectations, and the latest round of financial results, although beating on earnings and coming relatively in-line on revenue, still weren't good enough because same-store comparables came in at 2 percent. But the slowing same-store comps should come as no surprise to any investor. Those comparables have been slowing for some time, and they are likely to continue to slow based on the current trend. 

Expectations had been for consolidated same-store comparables of 3.3 percent, but when Starbucks reported growth of only 2 percent, investors were unimpressed, and that is pushing shares lower.

This shows just how much of investing is based on perception. Since the fiscal fourth quarter of 2016, consolidated same-store comps for SBUX have been falling fairly steadily when they peaked at 8 percent. The last time Starbucks put up a comparison of greater than 3 percent was in the fiscal third quarter of 2017, and then you need to go back to fiscal fourth quarter of 2016 to find the next instance. The chart below shows how that slowdown has been steady. 

The trend in the United States is no different, as comparables also continue to fall. And as the company matures, high growth rates become much harder. 

It does come down to expectations, and for now, investors are still expecting faster growth out of Starbucks, but the company is no longer in the super-growth phase of its business. It is a maturing company, and as expectations continue to reset, betters day lie ahead for the stock. 

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.