Restaurant Brands International (TSX:QSR) has been a popular dividend stock over the years. The company has expanded far and wide, buying up household names in the process. But is it still worth holding onto or even buying in the current market? Or should investors look elsewhere for future growth? Let’s break down the financials, sector struggles, and future outlook to determine if QSR stock is a buy, sell, or hold for your portfolio.
Recent performance
First, let’s take a look at QSR stock’s recent performance. With a stock price of $100.13 at writing and a market cap of $32.6 billion, the stock is trading close to its 52-week high of $112.12. While the stock hasn’t experienced any wild fluctuations recently, it’s essential to note that the trailing Price/Earnings (P/E) ratio stands at 18.3, thus indicating the stock isn’t too expensive. Especially when compared to its sector peers.
When it comes to earnings, QSR stock has had a solid year. The company reported quarterly revenue growth of 17.2% year-over-year, and quarterly earnings grew by 16.2%. The forward P/E ratio of 13.7 suggests that future earnings might bring more value to the stock, perhaps signalling it could be undervalued. QSR stock’s operating cash flow of $1.3 billion and levered free cash flow of $1.2 billion are also strong indicators of financial health.
Sector issues
Despite these promising numbers, the restaurant sector is struggling. Inflation and labour costs are squeezing margins across the board, and QSR stock isn’t immune. However, with an operating margin of 29.4%, the company is handling these pressures better than many competitors. While cost pressures could continue, QSR’s profitability metrics remain strong. And this is a positive sign for long-term investors.
Looking at the balance sheet, QSR stock does have a significant amount of debt at $16 billion. The debt-to-equity ratio of 322.5% might raise some concerns. Yet given the company’s ability to generate cash, it doesn’t seem like an immediate threat. The company’s dividend yield of 3.1% is appealing, especially for dividend-focused investors, though it’s slightly below its five-year average.
In terms of future outlook, QSR stock is well-positioned. The company’s global reach, particularly with brands like Tim Hortons, Burger King, and Popeyes, means it can weather regional downturns. Furthermore, its ongoing investments in digital transformation and delivery services are paying off. And this should help in maintaining strong revenue growth in the coming years.
Foolish takeaway
So, should you buy, sell, or hold? If you’re looking for a long-term investment with stable dividends and growth potential, holding QSR stock makes sense. The company’s financials are solid despite sector challenges, and its future outlook remains bright. For more aggressive investors, the current dip in the stock price could also make it an attractive buy opportunity.
Alltogether, QSR stock is a strong, stable stock in a sector that’s currently facing some headwinds. If you’re already holding the stock, keep it. If you’re looking to add a resilient dividend payer to your portfolio, now might be a good time to consider buying.
