2010 was a good year for Starbucks (Nasdaq: SBUX) and its investors. The company's stock increased 39%. It paid its first-ever dividend in April, and announced an increase to that dividend just three months later. The good cheer for investors was supported by solid improvements in the company's business. Closely watched comparable-store sales posted gains in every quarter. Margins grew and free cash flow topped $1.2 billion. But 2010 is ancient history, so can Starbucks stay on the comeback trail in 2011?

Potential potholes
With a P/E ratio of 21.4 on 2011 estimates, Starbucks' stock isn't cheap, and the market has great expectations for the company. Higher coffee and other input prices could pressure earnings. The company selectively increased drink prices in September, but additional margin-protecting increases in 2011 could be difficult for consumers to swallow, especially if disposable income is squeezed by rising gas prices.

Starbucks is also battling Kraft (NYSE: KFT) to regain control of the distribution of its packaged coffee products to grocery stores and other retailers. Taking its eye off these sales channels has proven costly for Starbucks. It missed an opportunity in the single-cup coffee market, allowing Green Mountain Coffee Roasters (Nasdaq: GMCR) to dominate the segment, and is now playing catch up with its VIA product. Adding insult to injury, Starbucks' deal with Kraft prevents it from selling coffee in K-Cups for Green Mountain's Keurig machine. Starbucks' desire to regain control of its packaged coffee sales makes sense long term, but the breakup with Kraft may be expensive.

The longer view
Despite the potential bumps in the road in 2011, there is much to be bullish about. The company has improved the economics of its retail stores and has adopted a more rational approach to store growth. Further expansion in China is a big opportunity, and VIA generated $135 million of sales in its first year despite being a late entrant into the single-cup market.

Starbucks founder Howard Schultz is back at the helm and has significant financial and reputational skin in the game. Finally, the company has demonstrated a willingness to return cash to shareholders through buybacks and dividends. (Click here to see what Fool Alyce Lomax had to say today about Starbucks' logo change.)

While it's always sweeter to buy when the market puts a company on sale, I wouldn't rule out buying Starbucks at a today's prices. If the company's comeback parallels the comeback that McDonald's staged over the last decade, long-term investors won't be disappointed.  

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Fool contributor April Taylor does not own shares of the companies mentioned Green Mountain Coffee Roasters is a Motley Fool Rule Breakers choice. Starbucks is a Motley Fool Stock Advisor recommendation. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.