Investing in stocks can be challenging, but certain opportunities shine brighter than others. One such opportunity currently exists with Restaurant Brands International (TSX: QSR), a global fast-food powerhouse that owns iconic brands like Tim Hortons, Burger King, Popeyes, and Firehouse Subs.
While market sentiment fluctuates, savvy investors are recognizing that this is a very undervalued company with strong growth potential and a dividend worth considering.
Here’s why I think now may be a great time to pick up shares of QSR stock, which are off around 8% over the past month.
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Increasingly attractive valuation
When it comes to large-cap TSX stocks like Restaurant Brands, investors have historically done very well buying these companies when they’re cheap and holding them over the long term. I think right now, the stock is trading at a level that justifies some significant attention.
With QSR stock now trading at a price-to-earnings ratio of around 15 times, that’s a multiple that’s historically dirt-cheap for this name. Outside of various shocks (the pandemic), investors haven’t been able to pick up shares at such a level. Thus, the short-term concerns that have dragged down Restaurant Brands of late (quarterly misses and concerns around GLP-1 drugs) could overshadow the very robust long-term trends the company has seen in terms of its fundamentals.
Growth potential ahead
Aside from a solid dividend yield above 3% and a core business model which is about as defensive as they come (if we do see a recession, consumers looking to eat away from home are likely to become increasingly price-conscious, driving them to one of Restaurant Brands’s locations), there are various growth catalysts I think are worth looking at when it comes to this fast-food giant.
First, Restaurant Brands has built an impressive international business. With more than 30,000 locations spanning 100 countries, this is a truly international giant that’s having strong growth in emerging markets like Asia and Latin America. For example, Burger King has seen substantial growth in countries like India, where the middle class is rapidly expanding. Similarly, Popeyes is capitalizing on its popularity in North America by entering markets such as China.
The global fast-food market is projected to grow at a compound annual growth rate of 4.6% from 2023 to 2030. With its diverse portfolio of brands and proven ability to scale operations, QSR is well-positioned to capture a significant share of this growth.
Bottom line
Investors looking for value (and not only value but high-quality value) really need to look no further than Restaurant Brands for an example of a company trading at a price that really doesn’t make sense right now. This is a long-term holding I think is worth buying on the dip and holding for the long term.
