This past month I took a look at the Restaurant Industry, including monster chains McDonald’s and Yum! Brands, as well as smaller companies Cracker Barrel and Darden Restaurants. This table highlights the important metrics of each company, for easy comparison.
If you missed any of the analysis posts, check them out
*Unless otherwise stated, all growth rates and averages are based on a 10 year history
| Mcdonalds (MCD) | Yum! (YUM) | Cracker Barrel (CBRL) | Darden (DRI) | |
|---|---|---|---|---|
| Revenue Growth | 5.4% | 5.5% | 2.3% | 6.6% | Operating Margins | 21.4% | 13.4% | 6.9% | 7.9% |
| Net Margin | 13.7% | 8.4% | 4.3% | 5.2% |
| Dividend Growth (10 year) | 28.6% | N/A% | 50.1% | 39% |
| EPS Growth | 15.4% | 12.6% | 17.3% | 11.7 |
| FCF Growth | 22.9% | 24.6% | N/A% | 27.9% |
| Payout Ratio | 40% | 20% | 14% | 17% |
| Cash Payout Ratio | 43.6% | 25.2% | N/A% | 20% |
| Current Ratio | 1.5 | 0.94 | 0.76 | 0.54 |
| Debt / Total Capital | 44% | 68.3% | 75.2% | 46.3% |
| Avg. Return on Equity | 21.12% | N/A | 33% | 22.5% |
| Avg. Cash Return on Capital | 17.6% | -10.8% | 9.5% | 13% |
| 5 Year Avg. Low p/e | 16.4 | 15.1 | 8.5 | 12.7 |
| Current p/e (ttm) | 16.8 | 21.4 | 13.5 | 16.7 |
| Current p/e (forward) | 15.3 | 17.9 | 11.9 | 13.9 | 5 year high yield | 3.6% | 2.64% | 3.5% | 3.1% | Current yield | 3.17% | 1.97% | 1.8% | 2.7% |
There were some really great companies in this restaurant analysis, but we can’t buy them all – a choice must be made. I put McDonalds and Yum! at the top, and think either would make a solid stock pick. McDonalds is for the safer and more conservative investor, but I prefer to see it below $74. Yum! is more of a gamble (well, as far as large, stable dividend paying stocks go), and the play really depends on your faith in their China operations.
I don’t find Cracker Barrel at all interesting, and for a more detailed reason, check out the analysis here. I’m not ready to buy into Darden, but the company did catch my eye, and will go on my watch-list. A couple more years of earnings and dividend growth, and at the right price I would buy a small position.
To get all my updates, please subscribe to my rss feed
Full Disclosure: I do not own any CBRL, Yum!, or DRI. I am long MCD. My Current Portfolio Holdings can be seen here
6 Comments
Gotta love MCD. I love the dollar menu for lunch and I love the dividends. I’m thinking of doubling up on my investment in MCD, but it’s hard to find it on sale.
Of those companies, YUM is probably the second best investment. I agree with you on that. The growth story in China is intriguing. But, as you recently analyzed, the debt is concerning. The entry yield is a bit low for my tastes, and I wish it was a bit higher, which based on the payout ratio it certainly could be. The low payout leaves a lot of room for growth, which is comforting.
Great article!
Same here! I’m long on McD, considered YUM. Haven’t done any research on DRI so your tabulation is a good start for me!
Thanks DP, as always, your insights are much appreciated!
I’ve done very well in the last 12 months owning The KEG and Canada’s A&W. Great capital gains on A&W if you watch when to sell and then get right back in when it pulls back. The KEG yields about 9% and both have a nice steady growth pattern to them.