Looking into the current session, Starbucks Inc. SBUX shares are trading at $73.64, after a 2.89% rise. Moreover, over the past month, the stock went up by 18.58%, but in the past year, decreased by 3.93%. Shareholders might be interested in knowing whether the stock is undervalued, even if the company is performing up to par in the current session.

The stock is currently upfrom its 52 week low by 47.22%. Assuming that all other factors are held constant, this could present itself as an opportunity for investors trying to diversify their portfolio with Restaurants stocks, and capitalize on the lower share price observed over the year.

The P/E ratio is used by long-term shareholders to assess the company’s market performance against aggregate market data, historical earnings, and the industry at large. A lower P/E indicates that shareholders do not expect the stock to perform better in the future, and that the company is probably undervalued. It shows that shareholders are less than willing to pay a high share price, because they do not expect the company to exhibit growth, in terms of future earnings.

Most often, an industry will prevail in a particular phase of a business cycle, than other industries.

Starbucks has a better P/E ratio of 23.47 than the aggregate P/E ratio of 22.66 of the restaurants industry. Ideally, one might believe that Starbucks Inc. might perform better in the future than it’s industry group, but it’s probable that the stock is overvalued.

There are many limitations to price to earnings ratio. It is sometimes difficult to determine the nature of the earnings makeup of a company. Shareholders might not get what they're looking for, from trailing earnings.