Restaurant Brands International (TSX:QSR)(NYSE:QSR) is an Oakville-based company that operates three top franchise quick-service restaurants: Burger King, Tim Hortons, and Popeyes. Today, I want to discuss why this TSX stock looks undervalued, as we kick off the month of November. Let’s jump in.
How have restaurants performed after the reopening?
The restaurant industry was hit heavily by the COVID-19 pandemic. Back in June, I’d discussed why the reopening had the potential to reinvigorate this struggling space. A recent report from Restaurants Canada was optimistic about the future of the industry.
High vaccination rates had fueled some of that optimism coming into the fall. Due to these high rates, Restaurants Canada projected that annual foodservice sales were expected to reach $63.9 billion. That exceeds the previous prediction. Meanwhile, the report anticipates that foodservice sales will grow to nearly $80 billion in 2022. That would represent a 3.8% increase from pre-pandemic levels.
This improving environment is good news for TSX stocks like RBI.
Why this TSX stock looks undervalued right now
Shares of this TSX stock have dropped 6.2% in 2021 as of close on November 1. The stock has plunged 17% over the past six months. RBI last had an RSI of 32, putting it just outside of technically oversold territory. The release of its third-quarter 2021 results pushed the TSX stock down to these levels. Let’s look at that earnings report.
The company unveiled its Q3 2021 earnings on October 25. It delivered system-wide sales growth of 11%, 12%, and 4.4%, respectively, at Tim Hortons, Burger King, and Popeyes. Meanwhile, its global system-wide sales rose 11% from the prior year. Burger King, which has been RBI’s most consistent performer in recent years, posted international system-wide sales growth of 25% from the same time in 2020.
Total revenues at RBI rose to $1.49 billion compared to $1.33 billion in the previous year. Meanwhile, total adjusted EBITDA was reported at $607 million — up from $561 million in the third quarter of 2020. Adjusted net income came in at $353 million or $0.76 per share — up from $320 million, or $0.68, in the prior year.
Here’s why I’m looking to snatch up RBI in November
Back in March, I’d discussed why I was going against Warren Buffett’s latest move and looking to buy this TSX stock. RBI’s earnings have been strong, but there is lingering concern over the labour situation. This is not unique to RBI’s brands. Quick-service chains across North America have struggled with staff shortages since the beginning of 2021.
The Canadian government has gradually reduced COVID-19 financial support in recent months. This may generate a more favourable environment for employers in the labour market. I’m still looking to snag this TSX stock in this uncertain environment.
RBI last declared a quarterly dividend of $0.53 per share. That represents a 3.6% yield. This TSX stock is worth buying after its post-earnings dip.
