Starbucks (NASDAQ:SBUX) has been one of the greatest success stories of recent American business history. It singlehandedly turned coffee from a $0.50-a-cup afterthought to a $4-or-more stand-alone event. Financially speaking, the company's growth continues today. In its most recent quarter, Starbucks notched revenue growth of 20%, and net earnings 9% ahead of its prior-year totals. Those are respectable numbers, especially for a company that already has around $9 billion a year in sales.

Yet since peaking out at $40.01 a share last fall, Starbucks stock has tumbled precipitously, losing more than 30% of its market price.

Does that make sense?
That's not exactly the behavior you'd expect from a stock with Starbucks' tremendous operational growth history. The problem with Starbucks isn't with the company itself -- it's still a very solid, high-performing business. The problem with Starbucks is with the expectations that were baked into its share price. Plain and simple, they were higher than the company could realistically deliver.

Over the long run, a company's financial performance determines how its stock performs. From day to day, however, the questions "What did you deliver yesterday?" and "What are you going to do tomorrow?" matter more to Wall Street than a company's long-term results.

As a result, Starbucks' experience isn't all that unique. In fact, several companies have joined Starbucks in delivering strong earnings growth and deserving solid five-year projections, yet still seen their shares fall over the course of a year. Here's a handful:


EPS Growth

Anticipated Five-
Year Growth*

Price Change

Walgreen (NYSE:WAG)




Lehman Brothers (NYSE:LEH)




Kohl's (NYSE:KSS)




HCC Insurance Holdings (NYSE:HCC)




St. Mary Land & Exploration (NYSE:SM)








*Analyst consensus estimates from Yahoo! Finance.

Do something about it
The higher the expectations baked into a company's stock price, the stronger it must perform just to keep pace. As a result, it becomes far too easy for a high-priced company's shares to tumble. On the flip side, if a company is expected to fall into bankruptcy, merely staying alive may be enough to buoy its shares.

Expectations make all the difference.

As a retail investor, you can't do much about how well a company's performs, what the rest of the market is anticipating, or how its stock reacts to changes in its perceived future. What you can do, however, is control where, how, and when you invest your own money. That's why, at Motley Fool Inside Value, we always evaluate the long-term strength of any business and compare it to the market's expectations. When a strong business finds itself matched up with a weak stock, we pounce.

That's how we've beaten the market since our 2004 inception, and how we plan to keep on doing more of the same for years to come. If you'd like to take advantage of Wall Street's wild swings in expectations, join us today. Once you've discovered the thrill of owning a company before it beats low expectations, you'll be glad you did. You can start a free 30-day trial here.

At the time of publication, Fool contributor and Inside Value team member Chuck Saletta did not own shares of any company mentioned in this article. Netflix and Starbucks are Motley Fool Stock Advisor selections. The Fool has a disclosure policy.