Investing in long-term stocks when they’re cheap is a golden opportunity for building wealth. And Restaurant Brands International (TSX:QSR) stands out as a prime candidate. Buying undervalued stocks allows investors to capitalize on future growth while locking in a bargain. Stocks are often discounted during market corrections or when temporary challenges arise. Yet these dips often fail to reflect a company’s true potential. For QSR, its steady financial performance, strong brand portfolio, and consistent dividend payouts make it an attractive option for long-term investors.
Into earnings
QSR’s recent earnings underline its resilience. In its most recent quarter, the Canadian stock posted quarterly revenue growth of 24.7% year over year, a clear sign of robust consumer demand. Its operating margin of 27.41% and profit margin of 16.01% reflect efficient management and strong cost controls. Earnings per share (EPS) for the trailing 12 months stood at $5.73, solidifying its position as a profitable and stable investment. This blend of growth and profitability makes it a dependable choice for those looking to buy and hold.
What makes QSR particularly appealing is its globally recognized brands, including Burger King, Tim Hortons, Popeyes, and Firehouse Subs. These brands have a massive footprint across the world, giving QSR a diversified revenue base. Diversification not only mitigates risks associated with any one brand or market. It also provides a platform for growth in emerging economies where these chains continue to expand.
Consistency is key
Historically, QSR delivered consistent performance. While its stock price has seen ups and downs, its long-term trajectory shows an upward trend supported by strong earnings and dividend growth. In the past year, QSR’s stock has fluctuated between $86.46 and $112.12, currently trading at a reasonable $87.77 as of writing. This price places it near the lower end of its 52-week range, offering a compelling entry point for investors.
Looking ahead, QSR’s future seems bright. The Canadian stock is focused on modernizing its operations, expanding digital ordering capabilities, and improving customer experiences. Initiatives like drive-thru upgrades and loyalty programs aim to boost customer retention and sales. Furthermore, its international growth strategy ensures exposure to higher-growth markets, creating additional revenue streams.
Still valuable
From a valuation perspective, QSR appears attractive. With a forward price-to-earnings (P/E) ratio of 11.30, it’s trading at a discount compared to many peers in the quick-service restaurant industry. Plus, its dividend yield of 3.82% provides a steady income stream, making it ideal for investors seeking both growth and income. The payout ratio of 57.39% indicates that dividends are sustainable, leaving room for reinvestment in the business.
Another advantage of buying QSR now is its ability to generate cash. The Canadian stock reported an impressive $1.42 billion in operating cash flow over the trailing 12 months. This financial strength allows QSR to weather economic downturns, invest in growth initiatives, and maintain its generous dividend policy. With a beta of 0.96, the Canadian stock also provides a relatively stable ride, balancing growth potential with reduced volatility.
Foolish takeaway
For long-term investors, timing the market is less critical than time in the market. However, buying high-quality stocks like QSR during periods of undervaluation amplifies the returns over time. As the market recognizes QSR’s growth potential and pricing power, its stock price is likely to rise, rewarding patient investors who bought in at lower levels.
Buying long-term stocks when they’re cheap is an opportunity to lock in value and maximize future returns. QSR stands out with its strong earnings, globally recognized brands, and focus on growth and dividends. Its recent performance and promising outlook make it a standout choice for anyone looking to build wealth through a combination of steady income and capital appreciation.
