Restaurant Brands International (TSX:QSR) stock has been a hot run over the past year, with shares marching just shy of 14% year to date and a whopping 50% over the past year. Undoubtedly, management has seemed to learn from its past mistakes and could unlock a new world of growth, as it invests in its four cherished brands.
Indeed, cutting costs can make sense and bolster profitability. However, you can cut too deep, and there could be negative consequences that could cost a firm more than any costs saved. By cutting costs too deep, not only can one compromise on the growth front, but in the case of Restaurant Brands, franchisees could become disgruntled.
For years, Restaurant Brands hasn’t quite delivered the type of growth that one would come to expect from a trio of fast-food icons. Undoubtedly, the firm needed to invest money to take growth to the next level and put up a better fight with peers in the crowded fast-food scene.
There’s so much potential in QSR’s chains
The company behind Burger King, Tim Hortons, Popeyes Louisiana Kitchen, and Firehouse Subs is still experimenting with ways to bring growth into high gear. And of late, it’s found tremendous success over at Burger King. The long-time burger chain isn’t atop its corner of the fast-food market anymore. That said, it has the tools to “reclaim the flame” with smart investments in the right areas.
Indeed, QSR stock hasn’t really been the growth stock investors have hoped for, with a mere 17.4% gain over the past five years. Though the dividend has been bountiful, it’s clear that the company just wasn’t able to pull the right levers to get each one of its high-quality brands to be operating optimally.
With Burger King really flexing its muscles in the latest quarter, thanks to smart bets and new talent, I think QSR may finally have what it needs to get each one of its brands living up to its full potential. Indeed, Burger King could be the first massive transformation.
After that, Tim Hortons (which has a growth runway internationally) and Popeyes Louisiana Kitchen struck me as very capable chains with tons of expansion and same-store sales growth potential.
Burger King is finally proving itself as a hot chain again, and management really deserves credit for getting it right and investing to improve the overall customer experience. But the chain isn’t quite done yet. Chief Executive Officer Josh Kobza loves each one of the brands under the QSR umbrella and appears ready to turbocharge each one.
Restaurant Brands stock still looks too cheap, given the growth potential of its four brands!
Personally, I wouldn’t bet against QSR stock, even at more than $100 per share. Why? The company seems to finally have a leader who knows how to make smart investments. Burger King’s latest Whopper ad is making the brand relevant again. And with Popeyes looking to compete in the “chicken sandwich wars,” I’d argue the current valuation (23.12 times trailing price to earnings) doesn’t reflect the calibre of growth you could be getting from the name.
Restaurant Brands is back, and new dividend investors will want to stay with the name, as it eclipses new highs. Also, the 2.9% yield is a nice bit of sweetener!
