- For investors considering whether Restaurant Brands International at around US$73.76 represents fair value or a potential opportunity, this article focuses on what the current share price implies.
- The stock has declined 1.7% over the last 7 days, with returns of 2.9% over 30 days, 8.8% year to date, 14.8% over 1 year, 20.9% over 3 years, and 34.0% over 5 years. These figures can influence how investors think about both potential upside and risk.
- Recent news coverage has largely focused on Restaurant Brands International's position in the quick service restaurant space and how investors are responding to its execution and brand portfolio. This context helps explain why some shareholders are closely watching whether the current price still reflects the underlying business fundamentals.
- Based on Simply Wall St's valuation checks, Restaurant Brands International currently has a value score of 2 out of 6. The sections that follow compare different valuation methods and then consider a broader framework for thinking about what the stock might be worth.
Restaurant Brands International scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Restaurant Brands International Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model takes projected future cash flows and discounts them back to today to estimate what those cash flows might be worth right now.
For Restaurant Brands International, the model uses last twelve months Free Cash Flow of about $1.34b and a series of projected Free Cash Flows out to 2035. Analyst estimates extend to 2030, where Free Cash Flow is projected at $2.54b, and Simply Wall St extrapolates further years to complete the 2 Stage Free Cash Flow to Equity model. Each of these future cash flows is discounted back to today using a required rate of return to reflect timing and risk.
On this basis, the DCF model arrives at an estimated intrinsic value of about $84.53 per share. Against the recent share price of around $73.76, this implies the stock is about 12.7% undervalued according to these cash flow projections.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Restaurant Brands International is undervalued by 12.7%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.
Approach 2: Restaurant Brands International Price vs Earnings
For a profitable company like Restaurant Brands International, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. Investors usually expect higher P/E ratios when they see stronger earnings growth and lower perceived risk, and lower P/E ratios when growth expectations are more modest or risks are higher.
Restaurant Brands International is currently trading on a P/E of about 28.3x. That sits above the Hospitality industry average of roughly 20.2x and also above the peer average of about 23.1x. This suggests the market is willing to pay more for its earnings than for many competitors in the same space.
Simply Wall St's Fair Ratio for Restaurant Brands International is 32.1x. This is a proprietary estimate of what a reasonable P/E could be given factors such as earnings growth, profit margins, industry, market cap and risk profile. Because it blends these company specific inputs, the Fair Ratio can give a more tailored yardstick than simple industry or peer comparisons.
Comparing the Fair Ratio of 32.1x to the current P/E of 28.3x indicates that the shares are trading below that modelled level.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Restaurant Brands International Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as your way of attaching a clear story about Restaurant Brands International to the numbers you care about. This links your view of its brands, expansion plans and risks to a specific forecast for revenue, earnings and margins, and then to a fair value that you can compare directly with the current price on Simply Wall St's Community page. Narratives are available to millions of users, update automatically when fresh news or earnings arrive, and can differ widely. For example, one investor may build a Narrative that supports a fair value closer to the higher analyst target of US$96.00, while another may build a more cautious Narrative around the lower US$63.00 target. This gives you a structured way to decide whether today’s market price looks high, low or roughly in line with your own story for the company.
Do you think there's more to the story for Restaurant Brands International? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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