Consider the stunning transformation at Starbucks (NASDAQ: SBUX) since Howard Schultz returned to the helm in 2008. Nearly five years have passed since the company announced on January 07, 2008 that Chairman Howard Schultz would take on the additional role of CEO in an effort to restore shareholder value, a CEO role he previously held at the Company from 1987 through 2000. In 2008, Schultz immediately outlined a plan in the form of multiple Transformation Agenda for revitalizing the stagnating brand, including a commitment to refocus efforts on the customer experience.

In addition to stabilizing the domestic coffee business here in the U.S., Schultz embarked on a strategic evolution of the Company through a series of smart acquisitions and operational adjustments, and we find ourselves in the year 2012 with a brand having strongholds and a commitment to excellence far beyond its coffee origins. In particular, the November 2011 acquisition of Evolution Fresh allowed Starbucks to foray into the health & wellness category with the offering of nutritious juices. Most recently, Starbucks announced its largest acquisition ever in the form of Teavana (NYSE: TEA), which is discussed in my assessment below.

Here are four reasons why Starbucks presents an attractive investment opportunity at $49 per share:

  • Price targets range from $49 to $65 within the sell-side research community, with a median price target of $60. Credit Suisse recently reaffirmed its $64 price target, stating SBUX can continue to drive comps in a tempered macro environment and cited the potential for upward revisions to 2014 guidance.
  • Don't be fooled by Starbucks trailing-twelve-months price/earnings ratio of 28 times, compared to the S&P 500 P/E ratio of 15 times. Starbucks price/earnings to growth or PEG ratio stands at an attractive 1.57x compared to an industry average 2.86x. Annual EPS and revenue growth for the last five years are an impressive 15.43% and 7.16% respectively.
  • Acquisition of the Teavana brand combined with Starbucks global infrastructure is a huge boon for international growth, particularly in the Far East. While domestic coffee consumption is rising in China and India, demand for tea will continue to far outweigh its rival beverage, given the proud history and cultural significance of these tea-drinking nations.
  • The Company offers nearly a 2% dividend yield at the current share price. Starbucks instituted its dividend policy in March 2010 and has grown quarterly payouts from $0.10 a share ($0.36 total payout in 2010) to $0.21 a share ($0.72 total payout for 2012). Annual payout should continue to grow into 2013.

If further evidence is needed to support Starbucks' recent acquisition of Teavana, consider that the Company's acquisition of Tazo Tea in the year 1999 allowed the brand to grow its tea sales from 1% of revenue in the past decade to greater than 8% today.

Prescient investors who are interested in buying growth at an attractive valuation should consider picking up Starbucks shares at a Short price.

Author Note: Short refers to the smallest size drink Starbucks offers, and is not normally listed on the menu.