Dueling Fools: Starbucks Bear Rebuttal

Well, it seems Nate's and my positions on Starbucks (Nasdaq: SBUX  ) aren't so far apart after all.

We agree that Starbucks is overpriced. We agree that its price may decline. Where we differ is only a matter of degree. Nate suggests that a "10% to 15% drop in price is entirely possible," whereas I'm guessing that Starbucks will more likely follow eBay's (Nasdaq: EBAY  ) path and decline by as much as 50% to 60%. That's just the nature of companies that have been priced to perfection: It doesn't take much to tarnish the halo.

Of course, Nate and I part ways on one other important point as well. He's urging you to buy Starbucks while it's still expensive. I say wait until after it gets cheap.

After all, the great thing about investing in individual stocks is that you don't face a choice between buying and not buying, period. If Stock A is too expensive, there's always a Stock B out there offering the same potential for profits, but at a cheaper price.

My advice: Rather than pay for a company with a PEG ratio greater than 2, put your investing dollars into a more reasonably priced offering. For example, skimming through the recommendation list for the Fool's own Motley Fool Stock Advisor newsletter, I quickly found four stocks offering better valuations than Starbucks: Amazon.com (Nasdaq: AMZN  ) , American Healthways (Nasdaq: AMHC  ) , Resources Connection (Nasdaq: RECN  ) , and Shuffle Master (Nasdaq: SHFL  ) . Each of these four stocks is growing as fast as, or faster than, Starbucks. Yet each is priced at a discount:

	AMZN	AMHC	RECN	SHFL	SBUX
TTM P/E	34	44	24	34	49
Proj. 5-Yr. Growth	22%	27.5%	25%	26%	22%
PEG ratio (P/E to Growth)	1.5	1.6	1.0	1.3	2.2

So skip the Starbucks. The Foolish Surgeon General says this caffeine can be hazardous to your wealth.

Wait! You're not done. This is just a quarter of the Duel! Don't miss Rich's bearish beginning, the bullish view, and Nate's last word. When you're done, you're still not done. You can vote and let us know who you think won this Duel.

eBay, Amazon, American Healthways, Resources Connection, and Shuffle Master are Motley Fool Stock Advisor picks.

Fool contributor Rich Smith does not own shares of any company named above. If he did, The Motley Fool would require him to tell you so. We're sticklers about things like that.