• 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
    • Trifecta Stocks
  1. Home
  2. / Investing

The Net Profit Margins of These 10 Restaurants Might Surprise You

When I scan the restaurant space, I remain perplexed, wondering not only when they might be able to reopen, but also how quickly consumers will come back, and to what degree?
By JONATHAN HELLER
Apr 06, 2020 | 11:00 AM EDT
Stocks quotes in this article: GM, AAPL, HOG, GLW, MCD, YUM, DENN, DNKN, SBUX, NATH, DPZ, DIN, WING, RUTH

One of the impressive aspects of the pandemic has been the way that businesses have adapted in order to produce much needed supplies, whether they are masks, gowns, or other products needed in the fight against the virus. I'm not sure that's happened since WWII. During that era, my grandfather's GM (GM) plant in NJ switched from making car parts to full airplanes - the Grumman Avenger, which showed a great deal of effort and ingenuity in aiding the war effort.

Companies that are doing the same now, large or small, show us how that spirit is alive and well. From the large players such as Apple (AAPL) , which is producing 1 million face shields per week, to the smallest of the small that are doing what they can in the face of massive business declines, it is truly one of the positives to emerge from this otherwise frightening episode in our history.

We will be back open for business sooner or later, and I continue to peruse the wreckage for opportunities, building a list of potential candidates for purchase. I will admit though, I'm still not sure we are at "stupid cheap" levels, as there's still too much uncertainty. It's too difficult (for me anyway) to try and pick the "bottom" in this environment, but that does not mean I can't look.

I can't believe that I am seeing Harley Davidson (HOG) at $15/share, but that's what happens when production has to be suspended, or dividend/buyback champion Corning (GLW) at $18.

When I scan the restaurant space, I remain perplexed, wondering not only when they might be able to reopen, but also how quickly consumers will come back, and to what degree? Is this the end of the industry as we know it? I'm certainly not there yet, yet remain extremely concerned.

You can slice and dice the industry any way you like. In the past I've looked at debt levels, as well as names that were not doing well before the pandemic, as those that might not make it back.

This weekend, I was looking at net profit margins (trailing 12 month), and some in the top 10 in that category might be surprising:

  1. McDonalds (MCD) : 28.6%
  2. Yum Brands (YUM) : 23.1%
  3. Denny's (DENN) : 21.7%
  4. Dunkin Brands (DNKN) : 17.7%
  5. Starbucks (SBUX) : 13.8%
  6. Nathan's Famous (NATH) : 12.3%
  7. Domino's Pizza (DPZ) : 11.1%
  8. Dine Brands Global (DIN) : 11.1%
  9. Wingstop (WING) : 10.3%
  10. Ruth's Hospitality Group (RUTH) : 9%

Perhaps most surprising is the appearance of Denny's, which has very quietly risen from the ashes over the past decade-plus. The company has transformed itself from a company-owned restaurant model to franchising, and when you do franchising right, it is typically more profitable than owning the stores. I won't bore you with forward price-earnings ratios here because they are a bit meaningless at this point. However, few might have predicted in the late 2000's that DENN would still be standing. Its shares have been creamed like a lot of others recently. The stock is down nearly 70% in the past two months, but it's back on my radar, having not it owned for years.

As always, and here's the overall disclaimer in this market environment: you've got to be careful of the "it will come back" sentiment for names you are considering, especially more distressed names with heavy debt loads. Companies can survive, even when their stocks go to zero, and shareholders can walk away with nothing.

(Apple and Starbucks are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

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 GLW.

TAGS: Investing | Markets | Stocks | Trading | Restaurants | Coronavirus

More from Investing

For Smith & Wesson, Load, Cock and Fire Another Round

Bret Jensen
Jun 26, 2022 7:30 AM EDT

Here's how to aim for this gunmaker once more with a covered-call play.

The 10 Personality Traits of Successful Traders and Investors

James "Rev Shark" DePorre
Jun 25, 2022 10:00 AM EDT

Superior market players share these characteristics in their emotional makeup.

Does the Big Bounce Mean More to Come? Let's See What Drove the Move

James "Rev Shark" DePorre
Jun 24, 2022 4:42 PM EDT

Much of the rally can be attributed to structural reasons, not fundamentals, technicals, or even macro ones.

MongoDB Is Poised for a Rally

Bruce Kamich
Jun 24, 2022 2:15 PM EDT

Here's our initial upside price target for MDB which provides a general purpose database platform.

See That Down the Road? It's the Big 'Green' Bubble, Ready to Pop

Jim Collins
Jun 24, 2022 1:30 PM EDT

Environmental, social, and corporate governance has created a monster and gullible investors should hit the brakes on their EVs and run from the Washington technocrats while they have the chance.

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

  • 12:10 AM EDT PAUL PRICE

    More Insider Buying in American Woodmark (AMWD)

    American Woodmark , which I've discussed here fr...
  • 08:55 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 10 personality traits of successful traders an...
  • 12:08 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10

    As a Portfolio Name Agrees to a Merger, Here's Our...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 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