Restaurant Brands has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 14% to $77.66 per share while the index has gained 13.9%.
Is now a good time to buy QSR? Find out in our full research report, it’s free.
Why Does QSR Stock Spark Debate?
Formed through a strategic merger, Restaurant Brands International (NYSE: QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.
Two Things to Like:
1. New Restaurants Popping Up Gradually, Supporting Growth
A restaurant chain’s total number of dining locations often determines how much revenue it can generate.
Restaurant Brands sported 33,156 locations in the latest quarter. Over the last two years, it has opened new restaurants quickly, averaging 3.1% annual growth. This was faster than the broader restaurant sector. Additionally, one dynamic making expansion more seamless is the company’s franchise model, where franchisees are primarily responsible for opening new restaurants while Restaurant Brands provides support.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
2. Excellent Free Cash Flow Margin Boosts Reinvestment Potential
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Restaurant Brands has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the restaurant sector, averaging 15.9% over the last two years.
One Reason to Be Careful:
Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Restaurant Brands’s revenue to rise by 2.4%. This projection doesn’t excite us and indicates its menu offerings will see some demand headwinds. At least the company is tracking well in other measures of financial health.
Final Judgment
Restaurant Brands has huge potential even though it has some open questions. At $77.66 per share (or 18.1× forward P/E), is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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