This article looks at the 10 best restaurant stocks to buy according to analysts.
The restaurant industry has been challenged this year, with ingredient prices skyrocketing, rising operating expenses, and growing tipping fatigue. This has resulted in a shift in consumer preferences as Americans become more cautious about their spending patterns.
READ ALSO: 11 Best Fast Food Stocks To Invest In Right Now and 7 Best Restaurant Dividend Stocks to Buy Now.
Quick-service restaurants are integral to American culture, with around 83% of the families in the country dining out at these at least once a week, and one-third of Americans consuming fast food daily. However, a recent survey revealed that about 78% of people consider fast food a ‘luxury’ now and are cutting down on their consumption amid rampant inflation in the country.
Increased commodity and supply chain costs have also hurt the broader restaurant industry through surging menu prices, prompting Americans to cook cheaper meals at home. Carnegie Investment Counsel’s portfolio manager, Razmig Pounardjian, stated the following to Reuters in May:
“The lack of value offers has opened up consumers to shop for different options whether it be other (chains) or the grocery stores.”
According to a report in the National Public Radio (NPR), published in August, grocery prices grew only 1.1% over the past year, whereas the cost of restaurant meals soared 4.1%. Since mid-2020, restaurant prices have surged by nearly 24% compared to the cost of grocery items, which has grown 19% during this period. As a result, several notable restaurant chains have seen their earnings plummet this year, as consumers opt for a grocery splurge over expensive dining.
Despite pressures, it is not all doom and gloom for America’s restaurant industry. The market remains resilient, driven by the general desire among the citizens to dine at restaurants. Another critical factor that keeps the industry alive is how well it adapts to changing consumer trends and preferences through new offerings and value deals.
This year, the National Restaurant Association expects sales to top $1.1 trillion and add 200,000 new jobs to the economy, marking a new milestone for the industry. A restaurant ETF issued by AdvisorShares had gained 27.53% year-to-date as of the close of day on November 13, outperforming the broader market by two percentage points.
The downturn in inflation also bodes well for the future of the restaurant industry. Consumer prices have eased down from the peak of 9.1% in June 2022 to 2.6% in October 2024. While inflation rose 0.2% from last month and went higher for the first time since March this year, the condition remains favorable with the figure staying close to the Federal Reserve’s goal of a two percent annual rate.
Interest rate cuts are also likely to help boost restaurant stocks in the long run, as the low cost of borrowing would allow restaurant owners to go ahead with their expansion plans and also encourage consumer spending. In September this year, the Federal Reserve announced a 50-basis point rate cut, the first since March 2020. This was followed by a further quarter-point reduction in early November to bring interest rates to a range of 4.50% to 4.75%.
With that said, let’s now head over to the list of the best restaurant stocks to buy according to analysts.
A close-up of a table of people enjoying their meal and conversing in a Denny’s restaurant.
Methodology
For this article, we sifted through screeners to identify stocks in the restaurant industry that had an average share price upside potential of 20% or higher as of the close of day on November 12, 2024. Then we listed the top 10 stocks in ascending order of their average share price upside potential. We have only considered stocks that had at least three analyst ratings.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Restaurant Stocks To Buy According to Analysts:
10. Portillo’s Inc. (NASDAQ:PTLO)
Average Share Price Upside Potential as of November 12: 21.6%
Portillo’s Inc. (NASDAQ:PTLO) is a fast-casual restaurant chain that specializes in serving Chicago-style street food, with its menu featuring all-American favorites such as hotdogs, chargrilled burgers, and crinkle-cut fries, alongside various other sandwiches and shakes. It was founded in 1963 in Villa Park, Illinois, by Dick Portillo, and now operates in over 80 locations across different states in the U.S.
On November 5, the company reported financial results for the third quarter of 2024. Revenue was posted at $178.3 million, up 6.9% year-over-year, driven by the opening of a dozen new restaurants over the past 15 months. Same-restaurant sales declined by 0.9% during the quarter due to a decrease in transactions. Average check grew 2.6%, helped by a 4.4% increase in menu prices of certain items. EPS was logged at $0.11 beating expectations by five cents.
Portillo’s Inc. (NASDAQ:PTLO) opened its first restaurant in the Houston area in Richmond in October. The opening has been well-received with sales reminiscent of the levels observed two years ago in the company’s first restaurant in the Dallas area. Overall, the fast-casual restaurant chain plans to grow its restaurant count by 12% to 15% next year.
The restaurant company has been under pressure from investors that it should no longer own and develop real estate, and should shrink the size of its current outlets to improve its restaurant cash-on-cash returns. Portillo’s Inc. (NASDAQ:PTLO) is making great strides in reducing the size of its restaurants. Later this year, two restaurants built on 6,200 square feet will open in Texas. These will be 1,500 square feet smaller than traditional Portillo’s restaurants built in the past. The company is committed to refining its development model and taking out excess square footage, which should optimize its cash-on-cash returns.
Portillo’s Inc. (NASDAQ:PTLO) is among the best restaurant stocks to buy according to analysts, with a consensus Buy rating and an average upside potential of 21.6%.
9. Restaurant Brands International Inc. (NYSE:QSR)
Average Share Price Upside Potential as of November 12: 22.56%
Restaurant Brands International Inc. (NYSE:QSR) is a multinational restaurant holding company, headquartered in Toronto, Canada. It operates four major global food chains: Tim Hortons, Burger King, Popeyes, and Firehouse Subs. This allows the company to target various customer segments across different markets.
The company has made two strategic acquisitions this year to further bolster its global position and enhance its revenue stream. On May 16, it announced the acquisition of Carrols Restaurant Group, Inc., the largest Burger King franchisee in the U.S. with over 1,000 restaurants across 23 states. Carrols also operated 59 Popeyes restaurants in six states.
Restaurant Brands International Inc. (NYSE:QSR) intends to re-franchise hundreds of Carrols’ restaurants over the next few years. Later, on June 28, the company acquired Popeyes China from Tims China and also agreed to co-invest up to $500 million with Cartesian Capital to fuel the growth of Tims China. Investments in China have resulted in a bullish sentiment around Restaurant Brands International Inc., as China is one of the largest fast-food markets in the world
Despite sales declining in the broader restaurant industry, Restaurant Brands International Inc. (NYSE:QSR)’s financial performance remains resilient. Comparable sales were up 0.3% from last year in Q3, while net restaurants grew 3.8% year-over-year, translating into a system-wide sales increase of 3.2%. Consolidated revenue was posted at $2.29 billion, falling just shy of expectations of $2.31 billion. EPS was logged at 93 cents, missing forecasts by two cents.
Tim Hortons was the top performer during the quarter, witnessing significant same-store sales growth, driven by improved speed of service and growing traffic. System-wide sales declined for Burger King, Popeyes, and Firehouse Subs, attributed to a weakening in consumer spending over the summer.
While talking to CNBC on November 5, CEO Josh Kobza stated that sales trends had improved in October due to effective marketing promotions and improved economic conditions, with inflation easing, interest rates being cut, and gas prices going down.
Following the announcement of results for Q3, most Wall Street analysts maintained their Buy rating for Restaurant Brands International Inc. (NYSE:QSR). It is one of the best restaurant stocks, with a share price upside potential of 22.56%.
8. Dine Brands Global, Inc. (NYSE:DIN)
Average Share Price Upside Potential as of November 12: 26.04%
Dine Brands Global, Inc. (NYSE:DIN) is an American publicly traded company that owns and franchises three restaurant chains: Applebee’s Neighborhood Grill + Bar, the International House of Pancakes (IHOP), and Fuzzy’s Taco Shop.
On November 6, the company announced mixed results for the third quarter of fiscal year 2024. CEO John Peyman acknowledged that Dine was pressured by consumer pullback and a high promotional activity environment in the past quarter. Consolidated revenue for Q3 was posted at $195 million, dropping 3.8% year-over-year, primarily driven by a decrease in franchise and rental revenues. Applebee’s and IHOP both reported a drop in comparable sales. EPS was logged at $1.34, falling short of expectations by six cents.
Dine Brands Global, Inc. (NYSE:DIN) plans to continue its focus on value-driven promotions and marketing campaigns during the holiday season to drive traffic and sales. In Q3, Applebee’s entered into a partnership as the official grill and bar of the NFL. It also launched a new advertisement featuring players and coaches highlighting the $0.50 boneless wings campaign. During the Q3 earnings call, the company stated that early engagements with the campaign yielded encouraging results, reflecting the power of the brand alliance between Applebee’s and NFL.
Dine Brands Global, Inc. (NYSE:DIN) ended Q3 with improved liquidity. Unrestricted cash totaled $169.6 million, growing 10.5% quarter-over-quarter. It also paid $7.8 million in dividends. Dine Brands Global, Inc. (NYSE:DIN) is one of the best restaurant stocks to buy according to analysts, with a consensus Buy rating.
7. Cannae Holdings, Inc. (NYSE:CNNE)
Average Share Price Upside Potential as of November 12: 27.92%
Cannae Holdings, Inc. (NYSE:CNNE) is an investment firm that primarily invests in restaurants, football clubs, healthcare technology, and financial services. It was founded in 2014 and is based in Las Vegas, Nevada. The company’s portfolio of restaurants includes Ninety Nine Restaurant & Pub and O’Charley’s. Cannae has equity ownership interests of 88.5% and 65.4%, respectively, in these two restaurants.
Both restaurants fall in the casual dining segment of the restaurant industry. Ninety Nine Restaurant & Pub was founded in 1952 and now has outlets in 93 locations across seven northeastern states, while O’Charley’s was first established in 1971 and comprises four franchise locations and 58 company-owned restaurants in the southern and midwestern states.
Cannae Holdings, Inc. (NYSE:CNNE) declared financial results for the third quarter of 2024 on November 12. Quarterly total operating revenue was posted at $113.9 million, of which 90% was restaurant revenue. However, revenue was down from $144 million during the same period last year, due to a reduction of store locations.
Since last year, the company has been closing numerous unprofitable and struggling restaurants which were compressing margins amid inflation in the country. As a result, operating expenses declined 33% year-over-year to $133 million, attributable to lower external manager fees and restaurant item costs. The cost of restaurant revenue was also 20% lower from the same period last year because of reduced restaurant locations.
Recognized gains for the quarter stood at $23 million, a significant improvement from the $130 million of losses last year. However, the gains were primarily non-cash fair-value pickups relating to Paysafe and Dayforce shares. The company wants to transition out of public securities to private investments. As part of this strategy, on October 7, Cannae Holdings, Inc. (NYSE:CNNE) in partnership with KDSA Investment Partners acquired a majority stake in The Watkins Company, a 156-year-old brand known for its flavoring products.
The company is hopeful that this business will provide cash flow through equity distributions and preferred dividends. Cannae’s balance sheet remains stable with $40 million in cash and listed securities valued at over $1.4 billion. It has returned around $243 million to shareholders this year through buybacks and dividends, and plans on paying a quarterly dividend of 12 cents per share in December as well.
Cannae Holdings, Inc. (NYSE:CNNE) is among the best restaurant stocks to buy according to analysts with a consensus Buy rating.
6. GEN Restaurant Group, Inc. (NASDAQ:GENK)
Average Share Price Upside Potential as of November 12: 28.86%
GEN Restaurant Group, Inc. (NASDAQ:GENK) owns GEN Korean BBQ, which is a cook-it-yourself casual dining restaurant serving Korean and American-Korean cuisine. The company operates 43 restaurants located in Arizona, California, Florida, Hawaii, Nevada, New York, Texas, Oregon, and Washington.
It offers guests a dining experience where they serve as their chefs, preparing their meals on a grill at the center of the table, using pre-prepared ingredients provided by the restaurant. This helps GEN Restaurant Group, Inc. (NASDAQ:GENK) reduce its operating expenses by eliminating the need to hire professional chefs, often the highest-paid restaurant employees.
On November 12, GEN Restaurant Group, Inc. (NASDAQ:GENK) announced financial results for the third quarter of 2024. Revenue increased 7.8% year-over-year to $49.1 million, driven by the success of newer restaurants. It delivered $0.2 million in net income, translating to $0.01 of diluted earnings per share. Adjusted net income was posted at $0.9 million, or $0.03 of adjusted diluted earnings per share, beating expectations of a loss for the quarter.
The cost of goods sold declined to 31.4% in Q3 compared to 31.9% during the same period last year. Payroll and benefits expenses dropped 120 basis points to 30.5%. In contrast, general and administrative expenses as a share of total revenue stood at 9.1%, increasing from 8% in the previous quarter due to investments in infrastructure to support future growth and rising insurance costs.
GEN Restaurant Group, Inc. (NASDAQ:GENK) has opened three new restaurants recently, including two in October, which have performed exceptionally well. One of these, depending on how well the holiday season goes, is on track to become the new number one in terms of revenue. The other two are also likely to be in the top ten list. There is also a strong expansion plan in place, to open 10 to 11 restaurants this year. By 2026, the company expects to have 75 to 80 outlets.
GEN Restaurant Group, Inc. (NASDAQ:GENK) is one of the best restaurant stocks to buy according to analysts, with a consensus Strong Buy rating.
5. Bloomin’ Brands, Inc. (NASDAQ:BLMN)
Average Share Price Upside Potential as of November 12: 39.03%
Bloomin’ Brands, Inc. (NASDAQ:BLMN) is an American restaurant holding company that owns four brands: Outback Steakhouse, Carrabba’s Italian Grill, BonefishGrill, and Fleming’s Prime Steakhouse & Wine Bar.
The stock has slumped 53% year-to-date due to industry-wide pressures and changing consumer preferences. On November 8, Bloomin’ Brands, Inc. (NASDAQ:BLMN) announced financial results for the third quarter of 2024. Revenue for the quarter was posted at $1 billion, down 4% from last year, driven by a decline in comparable restaurant sales and the effect of foreign currency translation of the Brazilian Real relative to the USD. EPS stood at $0.21, narrowly beating expectations by one cent.
It ended the quarter with $1 billion in total debt, net of cash. The company upsized its revolver to $1.2 billion, which will provide improved liquidity and broader financial flexibility. Bloomin’ Brands, Inc. (NASDAQ:BLMN) has repurchased 10.1 million shares so far this year for $266 million. It has $97 million remaining under its share authorization program. On October 22, the company announced a quarterly dividend of $0.24 per share, which is payable in December.
Bloomin’ Brands, Inc. (NASDAQ:BLMN) entered into a Purchase Agreement with Vinci Partners on November 6 for the strategic re-franchising of its Brazilian operations, under which it would sell 67% of its ownership for approximately $243 million under the current exchange rate. This agreement is likely to simplify the business and help improve operations by focusing on domestic operations.
Despite the current headwinds, it has a price upside potential of over 39%, making it one of the best restaurant stocks to buy according to analysts.
4. Jack in the Box Inc. (NASDAQ:JACK)
Average Share Price Upside Potential as of November 12: 39.09%
Jack in the Box Inc. (NASDAQ:JACK) is an American restaurant company that specializes in quick-service food. The hamburger giant operates around 2,200 restaurants across 22 states. It also owns Del Taco, a Mexican fast-food chain with more than 600 restaurants nationwide.
The stock has been under pressure this year, having dropped by over 45% YTD due to rising labor costs, an increase in commodity prices, and a change in consumer habits amid rampant inflation in the country. These have affected JACK’s financial performance.
During Q3 2024, same-store sales for Jack in the Box Inc. (NASDAQ:JACK) declined by 2.2%, with company-owned same-store sales growing 0.1%, while franchise restaurant comps decreased by 2.4%. The restaurant-level margin dropped by 0.8% to $21.1 million, which was attributed to higher labor and operating expenses. The franchise-level margin was $74.6 million, down from $75.3 million a year ago. This was due to an overall drop in sales and the resulting decrease in royalty.
Del Taco’s same-store sales also decreased by 3.9% during the quarter. Company-operated restaurants saw a 3.5% decline in same-store sales, whereas franchise same-store sales dropped by 4.1%. Restaurant-level margin was $8.8 million, or 13.4%, down 400 basis points from last year. The company also recorded a non-cash goodwill impairment of $162.6 million for Del Taco, which has resulted in a consolidated diluted loss per share of $6.26 compared to an EPS of $1.41 in the prior year.
Cash flow from operations was at $45.3 million in Q3. Jack in the Box Inc. (NASDAQ:JACK) spent $24.7 million in capital expenditure including investments in technology, digital initiatives, and the opening of new restaurants. It also repurchased 272,000 shares of common stock during the quarter. On August 2, it declared a cash dividend of $0.44 per share to be paid in September.
Despite a downturn in sales, Jack in the Box Inc. (NASDAQ:JACK) has a robust expansion plan in place, opening 14 restaurants this year, and plans to enter the Chicago and Florida markets in fiscal year 2025. Del Taco has also had 12 openings this year, with plans to open three more outlets before the year closes. Some of its recent openings have been a tremendous success, posting record first-week sales. Late-night sales are also on the rise for both Jack and Del, indicating an encouraging potential for sales ahead.
Wall Street analysts have a consensus Buy rating for Jack in the Box Inc. (NASDAQ:JACK), with a share price upside potential of 39.09%, making it one of the best restaurant stocks to buy according to analysts.
3. Potbelly Corporation (NASDAQ:PBPB)
Average Share Price Upside Potential as of November 12: 47.14%
Potbelly Corporation (NASDAQ:PBPB) is an American corporation that owns the fast-casual restaurant chain, Potbelly Sandwich Shop. According to CNBC, there are 424 restaurants of the brand across 31 states and the District of Columbia. Amongst these, 345 are company-owned, while 79 are operated by franchisees.
Potbelly Corporation (NASDAQ:PBPB) announced its Franchise Growth Acceleration Initiative in March 2022, as part of which it aims to reach 2,000 restaurants over the next several years, with at least 85% of these shops being franchised. Total year-to-date shop commitments for 2024 are at 86 as of Q3 2024, an increase of 32 relative to the prior quarter. This has brought Potbelly’s open and committed shops to 695 across 33 franchise groups.
On November 7, Potbelly Corporation (NASDAQ:PBPB) announced financial results for the third quarter of fiscal year 2024, highlighting growth amid re-franchising efforts. System-wide sales in Q3 reached $139.2 million in Q3, up 1% year-over-year, due to system-wide unit growth. Revenue for the quarter was posted at $115.1 million, decreasing 4.7% last year due to the impact of re-franchising efforts.
Revenue from company-operated restaurants totaled $110.8 million. The remaining was contributed by franchise revenue that grew by $1.9 million, or 79.2% from last year, driven by a 30% increase in franchised units. Shop-level margin expanded by 70 basis points to 15.3%. Adjusted EBITDA for the quarter was posted at $8.7 million, representing 7.5% of total revenue. This was a 19% improvement from last year and was attributed to an increase in shop-level margin, disciplined G&A spending, and a strong performance of its franchise shops.
Potbelly Corporation (NASDAQ:PBPB) anticipates 2024 to be the best unit growth year for the company since 2017 by ending the year with a record number of franchise shops, which are expected to represent 22% of the system. It is one of the best restaurant stocks to buy according to analysts, with a consensus Strong Buy rating.
2. The ONE Group Hospitality, Inc. (NASDAQ:STKS)
Average Share Price Upside Potential as of November 12: 121.75%
The ONE Group Hospitality, Inc. (NASDAQ:STKS) is a restaurant company that operates notable upscale and polished casual restaurant chains including STK Steakhouse and Kona Grill, among others. It also provides hospitality management services for casinos, hotels, and other high-end venues.
On March 26, the company announced the acquisition of Safflower Holdings Corp., the owner of the Benihana teppanyaki brand and RA Sushi, for a deal valued at $365 million. The acquisition is set to add $575 million in annualized system-wide revenue for The ONE Group Hospitality, Inc. (NASDAQ:STKS), and approximately $70 million in annual run-rate EBITDA before synergies.
The acquisitions have resulted in a significant revenue bump for the restaurant company. On November 7, The ONE Group Hospitality, Inc. (NASDAQ:STKS) announced financial results for the third quarter of fiscal year 2024. Total GAAP revenues increased 152.3% year-over-year to a record $194 million. Restaurant operating profits also increased by 90 basis points to 13.2%, driven by robust restaurant-level margins of 17% at Benihana. It ended the quarter with $70 million worth of liquid resources, comprising cash on hand, revolver ability, and short-term credit receivables.
The ONE Group Hospitality, Inc. (NASDAQ:STKS) plans to open six new venues in 2024, which will include five company-owned restaurants, in addition to a managed STK Steakhouse. It intends to open between 5 to 6 restaurants annually moving ahead as well. The company is also encouraged by ongoing trends in the economy and considers the interest rate cuts to benefit its target demographics. While same-store sales are expected to decline 4% to 8% in Q4, it anticipates consolidated margins of around 17% for fiscal year 2025.
The ONE Group Hospitality, Inc. (NASDAQ:STKS) is one of the best restaurant stocks to buy according to analysts, with a consolidated Buy rating.
1. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)
Average Share Price Upside Potential as of November 12: 142.72%
Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is an American chain of casual dining restaurants, that serve gourmet burgers, brews, and other food items.
On November 6, the company announced financial results for the third quarter of 2024. Revenue was posted at $274.6 million, down by $2.9 million from last year due to the impact of the closure of nine restaurants over the past year. However, comparable restaurants revenue grew 0.6% due to an uptick in guest check average.
Restaurant-level operating profit was at 9% of the total revenue, decreasing by 210 basis points year-over-year because of a lower guest count and an increase in discount levels during the quarter. These factors also resulted in an adjusted EBITDA of $2.1 million, which fell well below the $4.7 million mark during the same period last year. As a result, Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) posted a net loss of $18.9 million for the quarter, worsening from a loss of $8.2 million in Q3 2023.
However, there were also numerous positives from the quarter. Red Robin’s Loyalty 2.0 program’s relaunch has been a success, averaging 150,000 sign-ups per four weeks. New member transactions have surged 141% year-over-year, whereas the number of members transacting twice or more has increased by 12% compared to the prior year. Moreover, over 400,000 previously lapsed loyalty members have re-engaged with Red Robin as part of the new loyalty program.
Effective marketing strategies through digital and social media are also driving traffic to Red Robin restaurants. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is also seeing improved guest satisfaction scores, which are now the highest since 2016 and above the industry average. This demonstrates the value guests perceive from Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB)’s menu upgrades and hospitality.
While the company expects ongoing promotional offers to carry a net cost in the short run, it anticipates that these will help achieve positive traffic growth and increased profitability in 2025. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is the best restaurant stock to buy according to analysts, with the highest share price upside potential. Analysts also have a consensus Strong Buy rating for the stock.
Overall, RRGB ranks first among the 10 Best Restaurant Stocks To Buy According to Analysts. While we acknowledge the potential of restaurant companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RRGB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
