• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Real Estate

My Rather Short List of Restaurant Stock Favorites

My favorites are a combination of cheap valuations, and potential takeover targets.
By JONATHAN HELLER
Apr 13, 2018 | 11:00 AM EDT
Stocks quotes in this article: CMG, DIN, CBRL, BH, BLMN

Let me preface this column on a handful of restaurant stocks that I find interesting with the following: overall, I am no fan of the restaurant sector, due to what I consider to be excessive valuations. Take Chipotle (CMG) , for instance, one of the great growth stories of the past several years. However, after topping out in the $750 range in mid-2015, and running into some operational issues, the stock has fallen 56%. Yet, it still trades at 38X this year's consensus estimates (30 X 2019 consensus); great food, great concept, great growth story, just expensive.

The industry itself is in an interesting spot; the growth in publicly traded restaurant names the past several years, which led to a glut of sorts, has been supplanted by a rash of acquisitions, many of them private equity. Over the past two years, the list includes Panera Bread, Bob Evans, Ruby Tuesday, Buffalo Wild Wings, Krispy Kreme Doughnut, and most recently, Fogo de Chao, (three of which, Bob Evans, Ruby Tuesday, and Krispy Kreme I owned).

My own rather short list of restaurant favorites, is a combination of cheap valuations, and potential takeover targets, and included the following:

Dine Brands  (DIN) - Parent of Applebee's and IHOP, which was one of 2017's worst performing restaurant stocks, has had a nice run since the beginning of 2018 (+39%). Yet, it still trades at just under 12 X next year's consensus earnings estimates, one of the cheapest in the sector. The company operates under an-all franchise model, which is where the industry has been heading. Currently yielding 3.5%, the company did recently reduce the dividend from 97 cents/quarter to 63 cents, but in this case, the market yawned. Applebee's has been doing a nice job with the menu and drink and appetizer specials; we'll see if this translates into the bottom line.

Cracker Barrel (CBRL) - This iconic brand has had quite a run over the past several years, yet continues to chug along, at a reasonable 16 X next year's consensus estimates. Currently yielding 3%, based on its regular $1.20 quarterly dividend, the company has also been paying special dividend for the past several years, including $3.50 last May. CBRL also remains real estate rich, owning 418 of its 645 locations, yet its net-debt (debt less cash) stood at just $232 million at its latest quarter end. My exposure to CBRL comes in the form of owning Biglari Holdings (BH) , which owns 20% of the company. CBRL might make an interesting target for someone; not sure that Biglari Holding's pockets, however, are deep enough to take out the rest of the company.

Bloomin' Brands  (BLMN) - Trading at 15 X next year's estimates, and with activist Barington Capital involved, BLMN remains interesting. I have yet to take a position however. Shares were down about 3% yesterday, and that's likely due to the announcement that activist Jana Partners, reduced its stake in BLMN from 8.6% to 6.4%. Barington wants BLMN to spin off three of its brands, Bonefish Grill, Carrrabba's Italian, and Fleming's Prime Steakhouse and Wine Bar into a separate company, leaving its flagship brand, Outback Steakhouse as a separate company. The theory is that doing so will enhance shareholder value. In a way, this reminds me of the Bob Evans situation, which took a couple years to play out. Still, it is one to watch. BLMN yields 1.55%.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jonathan Heller was Long DIN, BH.

TAGS: Investing | U.S. Equity | Consumer Staples | Real Estate | Mergers and Acquisitions | Stocks

More from Real Estate

The Housing Market Is Turning in an Ugly Direction

Bret Jensen
Sep 20, 2023 2:15 PM EDT

2024 could be a brutal for the real estate sector.

My Top Pick for the Rest of 2023? Go Back to the Office and Get Paid for It

Peter Tchir
Sep 11, 2023 3:10 PM EDT

Here's why I want exposure to commercial real estate.

Country Garden Fends Off Default as China Property Stocks Spark to Life

Alex Frew McMillan
Sep 6, 2023 10:26 AM EDT

China's largest developer is fighting for life but its efforts have prompted a rally in distressed debt and Hong Kong property stocks.

China's Shadow-Banking System Thrust Into Spotlight

Alex Frew McMillan
Aug 16, 2023 8:10 AM EDT

One of the largest asset managers in China's informal private-equity sector appears to have run aground, ceasing payments on its products.

These 3 Firms Are Riding the Ripples Caused by the Shift in the Workforce

Bret Jensen
Aug 4, 2023 11:30 AM EDT

I expect office values to continue to implode thanks to the workplace revolution.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:24 AM EDT BRUCE KAMICH

    This Could Get Messy

    A number of key stocks are getting close to import...
  • 01:41 PM EDT CHRIS VERSACE

    Latest AAP Podcast With Helene Meisler!

    Listen in as the Action Alerts PLUS podcast talks ...
  • 09:07 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The Most Common and Costly Mistake in Investing
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login