8 Cheap Restaurant Stocks to Buy According to Hedge Funds

1. Bloomin’ Brands, Inc. (NASDAQ:BLMN)

Forward Price to Earnings Ratio: 6.51

Number of Hedge Fund Holders: 27

Bloomin’ Brands, Inc. (NASDAQ:BLMN) is an American restaurant holding company that owns four brands: Outback Steakhouse, Fleming’s Prime Steakhouse & Wine Bar, Carrabba’s Italian Grill, and BonefishGrill.

On November 6, the company signed a Purchase Agreement with Vinci Partners for the strategic re-franchising of its Brazilian operations, selling 67% of its ownership for approximately $243 million. According to analysts, the deal is likely to simplify BLMN’s business and aid in improving operations by focusing on domestic operations.

BLMN’s share price has slumped by over 50% year-to-date due to industry-wide pressures. The company generated a revenue of $1 billion during Q3, down 4% year-over-year due to a decline in comparable restaurant sales and the effect of foreign currency translation of the Brazilian Real relative to the USD. EPS was posted at $0.21, beating estimates by one cent.

The company upsized its revolver to $1.2 billion during the quarter, which is expected to provide improved liquidity and broader financial flexibility. BLMN’s total debt, net of cash, was $1 billion. This year, the restaurant company has repurchased 10.1 million shares for $266 million. On October 22, BLMN announced a quarterly dividend of $0.24 per share, which is payable in December.

CEO Mike Spanos, who came into this role in September, is determined to turn things around. He comes in with a reputation for having led established organizations in the past through challenging environments with his customer-first mindset. Despite the headwinds, the overall sentiment around the stock is encouraging, as Wall Street analysts anticipate a 33% uptick, on average, in its share price. According to Insider Monkey’s database for Q3 2024, 27 hedge funds had investments in the company, up from 23 at the end of Q2.

Overall, BLMN ranks first among the 8 Cheap Restaurant Stocks to Buy According to Hedge Funds. 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 time frame. If you are looking for an AI stock that is more promising than BLMN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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