If a company earns high returns on its capital, negative free cash flow makes a lot of sense--the more spent the better. The company is investing lots of money in the business, but it's earning a high return on that investment.
Starbucks' historical returns on equity (ROEs), however, fall well below the averages for both the S&P 500 and the aggressive-growth group. These low ROEs result mainly from Starbucks' thin net margins, which are a fraction of the S&P 500's--Starbucks earns just $0.06 for every dollar of revenues. These low returns on capital show that Starbucks is still something of an unproven commodity. It's funneling large sums into new stores, but has yet to show that these investments can earn a good return.
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