Here’s an appeal to our readers. For the price of a cup of coffee, you could buyā¦ well, not very much. About 1/37 of a stock in Restaurant Brands International Inc. (TSX: QSR)(NYSE: QSR), to be precise.
Weāre riffing on a familiar website pop-up here, but the message is pretty much on point. Stock in Restaurant Brands is doing okay. In fact, today itās up by half a percent to $73.38. Thatās a little bit of good news for shareholders who have been watching the Tim Hortonsā PR machine burn through a serious amount of gas in recent months. But stock in Restaurant Brands is still currently devalued thanks to the recent Tim Hortons debacle, so letās take a look at whether itās worth saving your beans to buy a watered-down cup of joe.
People still need to eatā¦
ā¦and drink coffee. Let’s face it, the Tim Hortons’ model just works. Cheap food, good coffee, fast service ā itās a brand thatās about as efficient as it could possibly be. So while the dispute between franchisees and their parent company rumbles on, the fact is that Tim Hortonsā customers are satisfied, as their Q1 report shows. Sure, a 2.8% growth in Tim Hortons’ operations isnāt much, but itās still growth in a saturated market. Likewise, a 2.1% sales growth isnāt much, but hey, at least itās not a decline. And with a new marketing campaign and renovations on the way, the brand looks set for further growth.
Whatās eating Restaurant Brands?
Besides the public spat between Restaurant Brands and its franchisees, McDonald’s Corporation is also nibbling at Tim Hortonsā client base, muscling in on the market penetration model with its cheap coffee. And that might make already jittery potential investors question the staying power of Restaurant Brands.
As I wrote recently, millennials like to invest in products and services theyāre familiar with. New investors may thereforeĀ be tempted to side with a big, visible Tim Hortons’ competitor like McDonald’s. But Iām going to recommend that they stick with Restaurant Brands as a possible value opportunity. Why? Because while commodities are notoriously volatile right now, Tim Hortons is still punching above its weight in a market dominated by massive high street brands.
Will Restaurant Brands be able to fend off McDonald’s with its $1 coffee? Yes, because competing penetrators are nothing new – and thereās still a Tim Hortons on pretty much every street corner in Canada.
And let’s not forget that Tim Hortons is beginning to expand overseas. Youāll already find your familiar coffee-slingers in the U.S., but there may well be one of the cut-price little eateries on street corners across Europe soon.
The bottom line
If youāre looking for a growth stock with a battle-ready and expansion-hungry management style, Restaurant Brands could be for you. And with a rewarding dividend stock with a forward annual yield of 3.16%, you also have a tasty stock for income investors.
A 13% share price dip is catnip to investors looking for a value opportunity. If you think Restaurant Brands is going anywhere, think again. With plenty of Canadian customers providing healthy footfall in branches of Tim Hortons throughout the country and beyond, this is a stable stock worth buying and holding. As long as coffee-swilling industries exist ā from construction to education and everything in between ā thereāll be very few red Tim Hortons’ cups strewn across the landscape.
