Restaurant Brands International (TSX:QSR) is a well-known global conglomerate of world-class fast-food banners. The company’s portfolio, which includes Canada’s favourite Tim Horton’s, as well as Burger King, Popeye’s Louisiana Kitchen, and Firehouse Subs, generates around $35 billion in annual revenue. The company has created a portfolio that stands alone as one of the most defensive and value-oriented offerings in the market.
It’s for this reason that I’ve remained a long-term bull on this company. Let’s dive into where this stock could be headed over the next five years, and why I believe investors ought to consider this stock at current levels.
Recent performance remains strong
In order to provide any sort of outlook for any company over any timeframe, assessing historical performance is important. In this regard, Restaurant Brands remains a top company worth considering.
In its recent Q4 earnings report, Restaurant Brands noted the company added 3.9% more locations, with Popeye’s seeing the most growth at 4.3%. This growth rate may be enhanced over time as the company creates more eateries and improves the same-store performance of its existing locations. On this front, the company has done a great job, creating bottom-line growth that has flowed through to an aggressive dividend policy.
In fact, from 2015 to today, Restaurant Brands’ management team has raised its annual dividend from $0.36 per share to $2.32 per share annually. Currently, QSR stock yields an impressive 3.2%, with more dividend growth likely on the horizon. This makes the company’s total return profile attractive for those with an investing time horizon of five years or longer.
Five-year outlook for QSR stock
Looking at what Restaurant Brands’ management team projects five years out, we can make some assertions about where this stock should land over this timeframe. The company expects to produce around $3.2 billion in operating profit by 2028, averaging 7.8% annual growth over this period. Operating margins are expected to expand to 32.6% by 2028 (up from 31.3% currently) and net income should come in closer to $2.2 billion. Putting a current multiple of 18.6 times earnings on this number, we can arrive at 24% upside from here.
Of course, that assumes we hold this multiple constant, the macro environment remains the same, and the company hits its targets perfectly. None of these factors are assured. However, this stock’s minimum upside should be around 25% over this period, assuming a base case “business as usual” scenario over this timeframe.
My take
It’s my view that Restaurant Brands could see its stock price move considerably higher over the next five years. I think a doubling of QSR stock between now and the end of the decade is entirely plausible, and I’m not even factoring in the added value investors will receive in the form of dividends over this timeframe.
From a growth, dividend and value standpoint, Restaurant Brands remains among my top picks in the Canadian market. For those with a long-term investing time horizon, this is a stock worth buying and holding for the long term.
