8 Cheap Restaurant Stocks to Buy According to Hedge Funds

6. Denny’s Corporation (NASDAQ:DENN)

Forward Price to Earnings Ratio: 12.09

Number of Hedge Fund Holders: 13

Denny’s Corporation (NASDAQ:DENN) is one of the largest full-service restaurant chains in the United States, with 1,586 restaurants. The chain is known for its diverse menu and 24/7 service, targeting various consumers, including late-night diners and budget-conscious eaters.

The company recently announced the closing of 150 restaurants over the next year, with about fifty locations set to cease by the end of this year, while the remaining are expected to be shut down in 2025. Denny’s Corporation (NASDAQ:DENN) is targeting underperforming locations that burden its financial position. The company is also easing up on the requirement for its restaurants to stay open around the clock, joining a common trend in the industry, since the pandemic, to slash operating hours.

On October 22, Denny’s Corporation (NASDAQ:DENN) announced financial results for the third quarter of 2024. Total operating revenue was $111.8 million, down 2% from last year, driven by several reasons, including a decrease in equivalent units, franchise occupancy revenue, and a dip in fees associated with the sale of kitchen equipment. Net income for the quarter stood at $6.5 million, or $0.12 per diluted share.

CEO, Kelli Valade, stated that the relaunch of Denny’s value menu and the expansion of its virtual brand, Banda Burrito, helped the company outperform the BBI Family Dining index in domestic systemwide same-restaurant sales for the third successive quarter. Keke’s Breakfast Cafe also experienced improved same-restaurant sales compared to Q2, driven by the company’s solid marketing strategies during the quarter.

Wall Street analysts remained bullish on the stock, with a consensus Strong Buy rating and a share price upside potential of 17%. According to Insider Monkey’s database for Q3 2024, 13 hedge funds held a stake in the company. Considering its low forward P/E ratio, Denny’s Corporation (NASDAQ:DENN) is one of the top cheap restaurant stocks to buy according to hedge funds.