Here’s Why I Think Restaurant Brands Is 1 of the Best Bets on the TSX Today 

Here’s why Restaurant Brands (TSX:QSR) could be one of the best stocks to buy for long-term upside in this current market.

| More on:
Young woman sat at laptop by a window

Image source: Getty Images.

For those looking to put capital to work in the Canadian stock market, there are certainly a wide number of options to choose from. From energy to financials and materials, there are a number of sectors most investors focus on. However, one company I’ve always thought is relatively overlooked on the TSX is Restaurant Brands (TSX:QSR).

The parent company of Tim Hortons (many Canadian’s favourite), Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs continues to fire on all cylinders. While the stock has dipped recently, I view this move as a potential buying opportunity. Here’s why.

Whopper growth

Restaurant Brands’s existing footprint is impressive, with 28,000 eateries across 100 countries in 2021, generating roughly $35 billion in revenue for the company annually. However, over the next five years, Restaurant Brands International intends to open 7,000 new locations across the globe. The company’s focus is primarily on expanding into markets where it already has success.

Management is targeting target sales for all of their restaurants combined are expected to reach $60 billion by 2028, with an adjusted operating income of $3.28 billion. For those investors who stay with the company over the long term, this could mean larger payouts.

Strong forward outlook

All of the company’s indicators showed a significant increase during the recent period. The company’s system-wide sales increased by an impressive 8.1% in the past year as a result of this growth. Financial performance-wise, income from operations came in at $544 million, a significant rise over the $447 million recorded the year before. In a similar vein, net Income increased significantly from $277 million to $328 million in the prior year.

Moreover, diluted earnings per share (EPS) increased, rising from $0.61 to $0.72 from the previous year. With an increase of 7.7% from the previous year to $540 million, adjusted operating income showed robust organic growth. Adjusted diluted EPS fell (0.9)% from the prior year to $0.73, reflecting a minor organic reduction. Together, these numbers demonstrate the company’s overall development and financial success throughout the specified time frame.

At present, QSR stock price is trading at roughly 21 times future earnings. The company’s sales in the first quarter of 2024 climbed by 8% to $1.74 billion, exceeding the $1.7 billion forecast. They beat the estimate of $0.72 with their EPS of $0.73. With $12.3 billion in net debt, QSR has a 4.8 times net debt to earnings before interest, taxes, depreciation, and amortization ratio. 

Compared to the 5.1 times debt ratio in the prior year, this ratio has somewhat dropped. Except Firehouse, a new acquisition, all brands saw strong sales. Up until the fiscal year 2028, the company anticipates a 5% growth in the number of restaurants and a 3% increase in sales. These are its long-term objectives. This quarter was mediocre all around.

Bottom line

Overall, this quarter for QSR has been decent, and the company’s valuation seems reasonable compared to other restaurants. So, if you are planning to add to your investment portfolio, I think QSR stock is a great place to start.

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 Chris MacDonald has positions in Restaurant Brands International. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.

More on Investing

sale discount best price
Energy Stocks

Time to Pounce: 1 Phenomenal TSX Stock That Hasn’t Been This Cheap in a While

Now could be the time to get into Cameco (TSX:CCO) stock, which is up 81% in the last year but…

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

3 Millionaire-Maker Tech Stocks That Should Be on Your Radar

These three tech stocks have already proven themselves worthy, but have a lot more to prove in the near future.…

Read more »

A close up image of Canadian $20 Dollar bills
Tech Stocks

3 No-Brainer Stocks to Buy With $20 Right Now

These three stocks are easy buys for those who don't have all that much to spend, and want long-term growth…

Read more »

calculate and analyze stock
Dividend Stocks

4 Fabulous Dividend Stocks to Buy in July

Are you looking for long-term income? These four dividend stocks should not only provide you with value in July but…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Stocks for Beginners

The Top 3 Long-Term TSX Growth Stocks to Buy Today

These three growth stocks might be some of the best-performing stocks of the last year, but according to analysts so…

Read more »

financial freedom sign
Dividend Stocks

5 Steps to Financial Freedom for Canadian Millennials

Follow these steps and nothing can stop Canadian millennials from achieving their early retirement dreams.

Read more »

top TSX stocks to buy

3 Top Canadian Growth Stocks That Could Make You Rich in 10 Years

Given their healthy growth prospects and attractive valuation, these three growth stocks could create superior wealth in the next 10…

Read more »

edit Sale sign, value, discount

Couche-Tard Stock is a Tremendous Bargain Today

Alimentation Couche-Tard (TSX:ATD) stock looks like a great bargain ahead of its coming earnings report.

Read more »