Restaurant Brands International (TSX:QSR) stock has been hot of late, with shares of the fast-food firm soaring around 15% over the past year. Though the stock is back on the retreat after failing to break out of a key ceiling of resistance at around $106 per share, I think shares stand out as absurdly undervalued given its impressive growth profile, which, I believe, seems to be getting better over time.
Despite the “boring” nature of quick-serve restaurants, QSR seems to have positioned its business to keep growth going strong for decades. Each one of its brands (Burger King, Tim Hortons, Popeyes Louisiana Kitchen, and Firehouse Subs) has impressive expansion potential in the U.S. market and overseas.
Additionally, Restaurant Brands can always buy a fifth major brand for its portfolio if the price is right. For now, however, I think the firm has its hands full with its four major brands, some of which haven’t scratched the surface of its potential (think Popeyes and Firehouse Subs).
Restaurant Brands: The perfect growth stock to play the future of fast food!
Restaurant Brands stock provides immediate exposure to burgers, coffee & doughnuts, fried chicken & chicken sandwiches, and submarine sandwiches. All bases in the fast-food scene seem to be covered, right? Perhaps with the exception of a pizza chain. Indeed, I’d view the Restaurant Brands puzzle as complete if the firm were to acquire the likes of a pizza brand.
Though 2024 may not be the year where the firm makes another splash in the mergers and acquisitions (M&A) waters, I think the firm could make a pizza deal with its next move, whether in 2025 or 2035. In any case, QSR doesn’t need to do any acquisitions right now, as it looks to unlock the growth potential of its existing brands.
The B.K. comeback has been impressive
Over the years, Burger King seems to have made a comeback. With a new (or, should I say, old) logo and store modernization efforts that have beckoned in some customers in droves. With the recent acquisition of a major franchisee for US$1 billion, Restaurant Brands seems ready to put its foot on the gas when it comes to bringing Burger King back to the top.
I’m a big fan of Burger King’s prospects with the new managers it brought in. As Burger King continues to hit the spot in the U.S., I’d look for the firm to replicate its modernization efforts internationally. Restaurant Brands International is an international growth story, after all!
For now, I view QSR stock as incredibly undervalued given the long-term growth prospects, which I view as less sensitive to the state of the world economy. If anything, recession and inflation could cause many to go to a fast-food chain over a fancy dining restaurant. Heck, it’s even cheaper to order off a value menu at your local burger joint than it is to shop for ingredients at your local grocer to make a meal.
The bottom line
With a 2.88% dividend yield, QSR stock remains a fantastic play for a breakout. Even as shares retreat off recent highs, I continue to view the name as a firm that could explode past its highs when the right cards have a chance to fall into place.
