Restaurant Brands International Inc. Is a Strong Buy at All-Time Highs

Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR) is at all-time highs, but I think the stock is still a buy considering its huge long-term earnings-growth potential.

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Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR) had an absolutely fantastic 2016. The stock returned a whopping 25.15%. I believe the stock still has room to run this year thanks to 3G Capital, the management team behind the company which knows how to obtain the perfect balance between growth, debt repayment, and dividend payouts.

There’s a reason why Warren Buffett and Bill Ackman both love the stock. The brands are fantastic, the growth potential is gigantic, and the management team is legendary.

Asian expansion underway

Restaurant Brands International has its sights set on the Philippines with the expansion of its Tim Hortons chain of restaurants. The Philippine market looks to be a goldmine for cafe and bake shops, so there’s a tonne of potential to boost long-term earnings from these expansions. CFO Josh Kozba stated, “the Philippines is a natural gateway as we look to expand into Asia, as such, we see it as an excellent entry point for the region.”

There’s no question that the Asian expansion will be through trial and error. There is huge potential for long-term earnings growth if the expansion is done properly. Thankfully, the management team at 3G Capital knows what it’s doing. It’s got the track record for international expansion with Burger King, and I believe the Tim Hortons expansion has the potential to be just as successful.

What if the expansion doesn’t work out?

The managers at 3G Capital won’t hesitate to shut down a store if it doesn’t show impressive numbers. They won’t waste time and money on markets that show little or no promise. The money will be used to test other markets until one shows impressive sales. Because of this, you can count on the company to deliver an incredible ROE for shareholders. Warren Buffett values a high ROE when attempting to value a business, and you should too.

The company currently has a 17.64% ROE, which is very attractive thanks to 3G Capital’s efficiency in optimizing initiatives. They are relentless cost-cutters, so you don’t have to worry about not getting the best bang for your buck.

Is the company’s debt something to worry about?

There’s a lot of debt, but it’s completely manageable considering the company is growing its free cash flow so rapidly. The company currently has US$8.4 billion worth of long-term debt, but most of it isn’t due until after 2020. I believe the company will have more than enough cash by the time the debt becomes due, so I’m not worried at all.

Fellow Fool contributor Will Ashworth believes that Restaurant Brands International has a good chance of seeing another year of 25% upside. Given the impressive same-store sales growth and promising international growth prospects, I also believe the stock is capable of having another outstanding year.

The stock may seem expensive right now, especially since it’s near all-time highs. But given the huge growth potential, I actually think it’s a good time to buy the stock and hold it forever.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any stocks mentioned. The Motley Fool owns shares of RESTAURANT BRANDS INTERNATIONAL INC.

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