About Restaurant Brands Int’l
Some people are avid fans of taking long walks on the beach and others are more inclined to watch the sun go down with the love of their lives, looking off into the distance as the horizon fades closer and closer as the stars perch out of their hiding places and shine themselves on you and your love.
Whatever, I guess.
I for one would rather listen to “The Whopper Song” by the brilliant singing squad at one of Restaurant Brands International’s (RBI) major subsidiaries, Burger King, and jamming out with my co-founder at MacroHint.
We all have our things.
It’s sort of embarrassing but awesome at the same time.
Ok, maybe more embarrassing but anyways!
You see, I know nearly every single word of Burger King’s latest jingle yet I hardly ever actually go to Burger King and partake in the Whopper in question.
Honestly, Burger King just doesn’t excite me one bit.
Heck, fast-food doesn’t really excite me all that much to begin with, however, if I am going out to get something to eat, the odds of me going out of my way to go to my local Burger King are just so low the Burger King himself wouldn’t even want to know.
However, who really cares if I’m not the biggest fan of its food or am not one of its more loyal customers?
We’re sure Burger King does just fine and the managers and owners (i.e., shareholders) of Ontario, Canada-based Restaurant Brands International can also rest well at night knowing that the brand is also home to equally popular fast-food brands such as coffeehouse and donut chain Tim Hortons as well as Firehouse Subs and Louisiana’s finest (not really, but just go with it), Popeyes.
It can instantly be seen and noted that Restaurant Brands International has scale going for itself, as each of these brands have a rather extensive footprint around the globe, not to mention that as the economy enters less prosperous states, consumer discretionary spending in fast-food specifically hardly ever moves given the seemingly low price points offered through each of these brands.
It’s also worth briefly noting that famed activist investor and owner of hedge fund Pershing Square Capital, Bill Ackman, owns a rather sizable portion of Restaurant Brands International (reported as nearly 16% of the firm’s entire portfolio as of this writing), which indicates that him and his firm like something about this company and/or its stock (NYSE: QSR).
This isn’t everything, but it is something.
While this conglomerate certainly has some good things going for it, the best thing probably being the Whopper soundtrack, we ought to let the objective numbers speak for themselves and gain some more perspective on this company and whether or not it is worth considering as an investment for the years to come.
Can I really have it my way at BK?
RBI’s stock financials
In getting things kicked off with this stock analysis article, Restaurant Brands International maintains a share price of just south of $76, a market capitalization of $23.49 billion as well as a price-to-earnings (P/E) ratio of 23.13 while dishing out whoppers, fried chicken, donuts, subs and, oh yeah, an annual dividend of $2.20 to its shareholders.
This certainly isn’t the worst of starts given that the company’s stock price appears to be slightly overvalued, at least, when considering that it is largely held that a price-to-earnings ratio of 20 implies that a company’s stock is trading at exactly fair value and anything above that figure indicates that it is presently trading at a relative premium, however, in the case of this restaurant conglomerate, not by a large one.
We also enjoy the fact that it pays out a nice annual dividend of nearly two dollars and a quarter to its shareholders.
Diving a bit deeper into this company and its financial condition, Restaurant Brands International’s executive team is in charge of around $22.7 billion in terms of total assets along with approximately $20.2 billion in terms of total liabilities, which, for the restaurant industry, is simply just not that surprising.
This being the case and considering the fact that RBI’s management team has been able to contain its total liabilities below that of its total assets is a net positive from our perspective, as we only hope that the company’s management team continues monitoring its debt levels while also resuming its growth in and around the United States and other regions as well.
Regarding the company’s income statement, Restaurant Brands International’s total annual revenues in recent years (since 2018, specifically) have remained fairly consistent as we had initially assumed, each year (between 2018 and 2022) finding itself generally between $5 billion and $6 billion, with, thankfully, the COVID-19 pandemic having minimal impact on this company’s revenues, as it reported its total annual revenues in 2020 as just a hair under $5 billion.
Of course, this speaks to RBI’s operations being overwhelmingly recession and/or economic catastrophe-resistant, which certainly puts a smile on our faces as prospective investors.
From the perspective Restaurant Brands International’s cash flow statement, its net income and total cash from operations have stood tall and consistent each year during the same aforementioned time frame as well, nudging down a little bit as reported in 2020, however, this makes complete sense given the state of the world at the time and the heightened expenses the company likely had to incur mixed with the dining locations it had to temporarily shut down.
RBI’s stock fundamentals
Now, keep in mind, friends, that the profit margins in the fast-food space (or in food in general, really) aren’t necessarily known for being all that astronomical, however, Restaurant Brands International is a solidified leader in the space and we sure hope so there’s some light at the end of this trailing twelve month (TTM) net profitability tunnel.
And boy is there.
For instance, according to the figures displayed on TD Ameritrade’s platform, Restaurant Brands’ TTM net profit margin stands at a whopping (or shall we say, Whopper) 22.41% to the industry’s listed average of 10.24%, which is certainly a sub(or should we say, a Firehouse Sub)stantial difference, of course, favoring RBI, which is something we were originally hoping to see but were still nevertheless elated to see it with our own eyes.
There are apparently perks of being near the top of the competition.
Onto the company’s core TTM returns on its respective assets and investment(s), Restaurant Brands’ both trail the industry’s averages by unalarming margins, likely attributable to its continued growth (geographical, among other respects) across its brands.
For example, also according to TD Ameritrade’s platform, Restaurant Brands’ TTM return on assets sits at 6.52% to the industry’s listed average of 8.28%, which, yes, is a difference, however, with the consistency and growth this company has experienced in other respects tied with its continued growth, doesn’t scare us all that much.
Should you buy RBI stock?
Many are willing to pay a premium for a stable, cash flow generative company’s stock and we completely understand and sympathize with that.
However, while the fundamentals with Restaurant Brands International are quite strong given the overall condition of its balance sheet, its consistent recent annual revenues and cash flows, not to mention its mighty fine TTM net profit margin in comparison to its peers, we still just don’t think slightly overpaying for a consistent business (namely, in terms of annual revenues) isn’t worth it at the moment.
Sure, Restaurant Brands International is in a pretty good place right now, however, we would much rather wait for its share price to come down a few points and its price-to-earnings ratio the same, especially given the current state of the market in that it is likely to meet lower lows sooner than higher highs, from our perspective.
We give this conglomerate’s stock a “hold” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.