Is Restaurant Brands International (TSX:QSR) Stock a Good Value Pick?

Consumer discretionary stocks like QSR could be good buys right now.

| More on:
question marks written reminders tickets

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Warren Buffett famously said that investors should buy the stocks of great companies and hold them forever. At the Motley Fool, we take Buffett’s advice to heart and believe in the power of a long-term perspective when it comes to investing.

Although everyone likes to find a good, undervalued stock, sometimes it is better to buy the stock of a great company at an okay price, as opposed to the stock of a mediocre company at a good discount. The stocks of businesses with sustainable, excellent performance make ideal buy-and-hold stocks.

For this reason, new Canadian investors should focus on the stocks of blue-chip companies with excellent fundamentals, understandable business models, essential products and services, wide economic moats, solid financial ratios, and good management.

Restaurant Brands International

Restaurant Brands International (TSX:QSR)(NYSE:QSR) owns and operates some of the most recognizable food brands in Canada and the U.S. such as Tim Hortons, Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs. QSR currently owns more than 29,000 restaurants in over 100 countries in the form of both corporate and franchisee stores.

The company sells all sorts of products, ranging from coffee, tea, and espresso-based hot and cold specialty drinks, fresh baked goods, including donuts, Timbits, bagels, muffins, cookies and pastries, grilled paninis, classic sandwiches, wraps, soups, and others.

Valuation

QSR is solid enough of a company that I would not worry about trying to time a good entry price. However, new investors should always be aware of some basic valuation metrics, so they can understand how companies are valued and what influences their current share prices.

Currently, QSR has been extending gains since Monday as of writing and is currently trading at $64.12, which is far below its 52-week high of $85.43. The current share price is actually close to its 52-week low of $63.45, making this a potentially good entry point.

QSR current has a market cap of $21.83 billion with approximately 38.81 billion shares outstanding. This gives it an enterprise value of $34.13 billion with an enterprise value-to-EBITDA ratio of 22.41, which is similar to peers in the consumer discretionary restaurant industry.

For the past 12 months, the price-to-earnings ratio of QSR was 29.1, with a price-to-free cash flow ratio of 15.03, price-to-book ratio of 8.67, price-to-sales ratio of 3.93, and book value per share of approximately $8.09. These metrics suggest that, even despite the recent correction, QSR remains fairly valued.

QSR is currently covered by a total of 26 analysts. Of them, 13 have issued a “buy” rating, two have issued a “sell” rating, and 11 have issued a “hold” rating. This is generally a considered a mixed to bullish sign, given the roughly equal amounts of buy and hold ratings.

QSR has a Graham number of 20.95 for the last 12 months — a measure of a stock’s upper limit intrinsic value based on its earnings per share and book value per share. Generally, if the stock price is below the Graham number, it is considered to be undervalued and worth investing in. In this case, QSR does not look undervalued.

Is it a buy?

Despite its current share price being more or less fairly valued, long-term investors should consider establishing a position if they have the capital. Over the next 10-20 years, your entry price won’t matter as much if QSR continues its strong track record of growth and profitability. QSR’s brands are widely recognized and enjoyed by consumers. Barring a gross strategic mistake, QSR will likely enjoy good market dominance for years to come. Consistently buying shares of QSR, especially if the market corrects, can be a great way to lock in a low cost basis.

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 Tony Dong has no position in any of the stocks mentioned. The Motley Fool recommends Restaurant Brands International Inc.

More on Investing

Target. Stand out from the crowd
Energy Stocks

3 Oversold TSX Stocks I’d Buy in Bulk

Recession fears impact oil prices, although three oversold stocks should remain resilient and generate substantial free funds flow throughout 2022.

Read more »

Stocks for Beginners

New Investors: 3 Top Dividend Stocks to Start a Simple Portfolio

These quality dividend stocks are worthy for new investors to consider for a simple passive-income portfolio.

Read more »

Dollar symbol and Canadian flag on keyboard
Tech Stocks

3 Top Canadian Growth Stocks to Buy in July

Here are three growth stocks you might want to add to your buy list in July.

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

CIBC Stock Could Be a Top TFSA Buy for a Rocky 2nd Half of 2022

CIBC (TSX:CM)(NYSE:CM) stock is a great dividend top pick to stash in a TFSA after the first-half market correction.

Read more »

exchange-traded funds
Dividend Stocks

2 Dividend ETFs With Significant Exposure to the TSX’s Top 2 Sectors

Two dividend ETFs offer ideal diversification because of their exposure to the TSX’s two strongest sectors.

Read more »

sale discount best price
Investing

RRSP Investors: Top Stock Pick on Sale After the Stock Market Correction

Quebecor (TSX:QBR.B) looks like a terrific dividend stock for RRSP investors to buy, as recession risks rise amid a market…

Read more »

edit Colleagues chat over ketchup chips
Investing

The Alternative Way to Look at Any Recession

Market down? Instead of losses, look for potential gains. This alternative way to look at any recession exposes a market…

Read more »

Arrow descending on a graph
Energy Stocks

Why Did Oil Stocks Crash so Suddenly?

Oil stocks like Cenovus Energy (TSX:CVE)(NYSE:CVE) crashed dramatically last week. Here's why.

Read more »