This Discounted Stock Is the Perfect Way to Play on Millennials’ Love of Protein

Cara Operations Ltd. (TSX:CARA) shares are a wonderful value at these levels for those wanting to play the rise of the millennials

| More on:

Cara Operations Ltd. (TSX:CARA) is a dine-in restaurant operator that just doesn’t get the respect that it deserves. The company has some delicious brands in its portfolio, including Swiss Chalet, Milestones, St-Hubert, East Side Mario’s and The Keg, to name a few.

Shares have a cyclical discount

Unlike its fast-food counterparts, Cara is more cyclical and is a play on the overall health of the Canadian economy. Come the next recession, when consumer spending falls off a cliff, dine-in players like Cara stand to be hit with a larger magnitude decline since eating out at a restaurant is typically one of the first monthly expenses to receive the cut.

Unlike grabbing a burger from your local fast food joint, with many of Cara’s restaurants, you’ll need to sit down, be pressured into ordering an appetizer or other high-margin offerings like alcohol to go with your main course. Oh, and let’s not forget about dessert! One can’t leave a restaurant without filling up their dessert stomach, after all!

When all is said and done, you’ll probably be looking at a hefty bill after gratuities are added, especially if you’re dining at Cara’s newly acquired ‘The Keg,” where you’ll surely pay up for the ambience.

It’s a wonderful experience, however, and millennials are willing to loosen their purse strings since they value experiences over materialistic goods, but when it times are tough, fine dining is typically out of the question.

A great way to play the rise of the millennials

Canadians are heavily indebted and may want to consider limiting their fine dining habits; however, I find this is unlikely, especially since millennials, on average, eat out more than their baby boomer counterparts and moving forward, their spending habits are slated to have a greater influence on consumer spending trends.

Given that millennials also tend to value healthier options and have a huge affinity for protein according to Mad Money host Jim Cramer, I believe fine dining plays like The Keg are slated to enjoy a nice tailwind over the next few years as the millennial generation approaches peak spending levels.

Millennials love eating out almost as much as they love protein. Whether they get their protein fix through steak from The Keg or chicken from Swiss Chalet or St-Hubert, Cara is a wonderful play on the rise of millennials.

Bottom line

In a previous piece, I noted that investors are quite wary when it comes to highly cyclical plays. In the case of Cara, shares are quite cheap versus that of the industry average. Shares trade at a 16.5 forward P/E, a 2.6 P/B, a 2.2 P/S, and a 9.3 P/CF multiple, all of which are lower than the restaurant industry average multiples of 18.1, 4.0, 2.9, and 15.8, respectively.

At these levels, Cara looks like a solid medium-term investment. Just make sure you understand the risks and the elevated magnitude of potential downside come the next economic downturn.

Stay hungry. Stay Foolish.

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.

More on Investing

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

stock research, analyze data
Bank Stocks

Canadian Bank Stocks: Buy, Sell, or Hold?

There are opportunities and risks on the horizon for the Canadian banks.

Read more »

Young Boy with Jet Pack Dreams of Flying
Stock Market

Is Air Canada Stock a Good Buy After Its Q3 Results

Down almost 60% from all-time highs, Air Canada is an undervalued TSX stock that remains an enticing investment in November…

Read more »

cloud computing
Investing

Where to Invest $10,000 in November

Given their solid underlying businesses and healthy growth prospects, I expect these two defensive stocks to outperform uncertain outlook.

Read more »

coins jump into piggy bank
Retirement

Here’s the Average RRSP Balance at Age 44 for Canadians

Holding stocks like Alimentation Couche-Tard (TSX:ATD) in an RRSP is a good way to build your wealth.

Read more »

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »