1 Alternative to Tim Hortons and Restaurant Brands International Inc. Stock

Uneasy About Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR) and the Tim Hortons debacle? Consider MTY Food Group Inc. (TSX:MTY) as an option.

| More on:

Tim Hortons and its parent company Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR) have received a great deal of negative press as of late. Predominantly due to a dispute with Tim Hortons franchisees in Canada, Restaurant Brands has not only been a news item, but it has also seen its share price deteriorate nearly 13% year to date.

As U.S. franchisees also begin to wade into the disagreements with Restaurant Brands, investors may consider weighing their options and examining the offerings of the competition. MTY Food Group Inc. (TSX:MTY) is among Restaurant Brands’s competitors, and it will be the stock that we investigate today.

What is MTY?

MTY Food Group, like Restaurant Brands, is a franchisor in the quick-service food industry with operations in both Canada and the United States. MTY franchises and operates under an impressive variety of banners, including instantly recognizable chains such as Mr. Sub, Jugo Juice, and Country Style.

The company continuously acquires new brands with notable additions in 2017 of Dagwoods Sandwiches and Salads and The Works Gourmet Burger Bistro, among others. So far in 2018, MTY has purchased the franchises and corporately owned locations of Timothy’s World Coffee and Mmmuffins as well as the licence to operate and franchise coffee shops under the trade name Timothy’s.

Valuation and dividends

Relative to Restaurant Brands, MTY offers tremendous value. At current prices, MTY trades at a price-to-earnings multiple of about 10.5, while Restaurant Brands trades at a price-to-earnings multiple of almost 18.6. Equally, MTY trades at a price-to-book ratio of roughly 3.1, while Restaurant Brands trades at a price-to-book ratio of nearly 6.5.

Income investors may, however, be inclined to favour Restaurant Brands for its 1.9% yield and impressive track record of dividend increases.

Since March 2015, Restaurant Brands has increased its quarterly payout from a mere US$0.09 to US$0.45 cents as of the most recent distribution for a stunning 500% increase. In the same time period, MTY has only increased its distributions by 50% from $0.10 per quarter to $0.15 for a current yield of about 1.15%.

Conclusion

Investors who are anxious about the actions that Tim Hortons franchisees are taking against Restaurant Brands, or who are simply sick of the Tim Hortons-Burger King-Popeyes diet of coffee, burgers, and chicken, should consider MTY Food Group.

With an average analyst 12-month price target of $53.88, MTY has potential upside of roughly 17%, while Restaurant Brands is projected to have upside of only about 6.5%. MTY offers a diverse and growing portfolio of brands and a compelling valuation, making it a great alternative.

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 James Watkins-Strand has no position in the companies mentioned. MTY Food Group is a recommendation of Stock Advisor Canada.

More on Investing

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

rising arrow with flames
Investing

2 Riskier Stocks With High Potential for Canadian Investors in November

Risky stocks such as Well Health Technologies have the potential to provide life-changing long-term returns.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

Canada day banner background design of flag
Investing

Got $500? 5 Top Canadian Stocks to Buy and Hold

These top Canadian stocks have solid fundamentals with potential to outperform the benchmark index by a wide margin.

Read more »

man touches brain to show a good idea
Energy Stocks

1 No-Brainer Energy Stock to Buy With $500 Right Now

Should you buy a cyclical energy stock at its decade-high? Probably not. But read this before you make a decision.

Read more »

Asset Management
Stocks for Beginners

TFSA: 4 Canadian Stocks to Buy and Hold Forever

Thinking about what to buy with the new TFSA contribution space in 2025? These four Canadian stocks are worth holding…

Read more »