While it may seem like the beginning of the end given the magnitude of the recent September stock market crash (if you can even call it that!) that saw the NASDAQ-100 plunged 11% in just three sessions, I’d argue that given the Fed’s backing, now is an excellent opportunity to scoop up the bargains while they fall back to earth.
In this piece, we’ll have a closer look at a stock that value-oriented investors should consider buying amid this market crash.
Restaurant Brands International severely mispriced by Mr. Market
Mr. Market doesn’t misprice stocks often, but when he does, value investors should be ready to back up the truck before the said stock has a chance to correct to the upside. Restaurant Brands International (TSX:QSR)(NYSE:QSR) is one of those stocks that could skyrocket once we’re out of this pandemic.
There’s no question that restaurants and fast-food firms have been feeling immense pain amid this crisis. Once the crisis inevitably ends (whether it takes a year, two, or even three), Restaurant Brands will be back to putting its foot on the growth pedal as the firm looks to expand while driving same-store sales (SSS) comps across its chains.
While Tim Hortons has failed to find a spot with Canadians even before the pandemic sent sales off a cliff, it’s a bad idea to discount the powerful brand’s turnaround potential. If activist investor Bill Ackman gets more active with his significant stake in Restaurant Brands, investors will be smelling the turnaround brewing at Tim’s within the next five years.
Far too bearish on Restaurant Brands
When it comes to Restaurant Brands, you tend to hear mostly about the negatives such as the COVID-19 impact and the sluggish trajectory of the Tim Hortons. What you should be paying more attention to is the longer-term growth potential behind Popeyes Louisiana Kitchen, Restaurant Brands’ secret weapon to winning the fried chicken wars.
Restaurant Brands knows how to drive menu innovation like it’s nobody’s business. That’s a significant reason why the legendary Popeyes Chicken Sandwich was an unprecedented hit that caught the attention of the entire quick-serve restaurant industry before the COVID-19 crisis.
Sure, Beyond Meat Burgers at Tim Hortons were an oddity, but that’s because the café and bake shop chain wandered outside its circle of competence. Restaurant Brands’ management is learning from its mistakes, and once it can get all three of its big brands in the right direction, watch out because the stock could find itself back at $100 without a moment’s notice, as the top-line grows in conjunction with its operating margins.
Restaurant Brands is one of the few firms that’s capable of growing its top line in the high double digits (via global expansion and SSS-driving initiatives) with lost capital costs. In the grander scheme of things, this pandemic will be a road bump for Restaurant Brands — an early-stage growth company capable of taking over the high-ROIC fast-food scene.
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 owns shares of RESTAURANT BRANDS INTERNATIONAL INC. The Motley Fool owns shares of and recommends Beyond Meat, Inc. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC.