Restaurant Brands (TSX:QSR) remains my top stock pick on the TSX. Hands-down, that’s been true for some time.
One of the largest quick-service restaurant giants in the world, Restaurant Brands has generated more than $35 billion in revenue worldwide this past year. The company has more than 28,000 units, operating in 100 countries. Moreover, with world-class banners such as Tim Horton’s, Burger King and Popeye’s Louisiana Kitchen under its umbrella, there’s some serious brand value associated with this stock investors ought to consider.
Here’s why I think this is the top TSX stock to own in this uncertain environment right now.
Defensive business model matters
We all need to eat, and how we choose to eat shifts based on a variety of factors. In good times, all restaurant operators tend to see an uptick in activity, as eating outside of one’s home becomes more attractive. However, when the economy turns sour, many fine dining and higher-end casual dining locations can take a hit. When they do, and consumers still look for that opportunity to dine out, they may more likely trade down to one of Restaurant Brands’ establishments.
This phenomenon drives cash flow stability, during all points of the market cycle. And given Restaurant Brands’ core portfolio of banners (and associated brand value and loyalty with each), the company has the potential to take market share when other restaurants are down and out. In other words, no matter the economic backdrop, Restaurant Brands has various gameplays to deploy to win.
Strong results drive impressive fundamentals
Given Restaurant Brands’ size, its recent system-wide sales growth number of 12.2% is truly remarkable. The fast food giant continues to pump out growth year after year, finding ways to innovate and drive improving fundamentals (and a higher valuation) over time.
The company’s net income in 2023 came in at $1.72 billion, a marked increase from 2022’s $1.48 billion. Restaurant Brands remains a highly profitable operator, and continues to see cash flow growth align with its top-line numbers. Thus, this is a profitable growth stock with a valuation that’s reasonable – something that’s hard to find in this market.
Bottom line
Despite its current growth and significant global footprint, the company is eyeing to expand its reach in new countries. It is also increasing its penetration in strong and established markets worldwide. Restaurant Brands International Inc. is eyeing to open more than 7,000 new restaurants in international markets over the next 5 years.
Moreover, the company aims to achieve $60 billion in system-wide sales and $3.2 billion in adjusted operating income by 2028. Hence, investors investing in this stock can benefit in the next decade as the company has enormous potential to generate higher returns.
