Quick Service Food Stocks Are Trading at Caviar Prices: McDonald’s Corporation (MCD), Starbucks Corporation (SBUX), Yum! Brands, Inc. (YUM)

These restrictions are terrible news because Indonesia is such a large market for sales growth. Yum! Brands, Inc. (NYSE: YUM) already has 700 locations in Indonesia, and the nation recorded an increase in fast food sales by 15%. Unfortunately, restrictions may prevent Yum! and other U.S. food store outlets from attaining their sales targets, which in turn may trigger other nations to adopt these policies. Darren Tristano, executive vice president said, “It’s going to probably slow things down a bit. This is going to be a bump in the road.” Gita Wirjawan, Minister for Trade, announced the rule earlier this month with the aim to protect small enterprises from unfair competition.

However, the rule has exceptions for special cases. According to Bill Edwards, CEO of Edwards Global Services, said, “Indonesia is a very attractive market because of the extremely fast-growing middle class with discretionary income.” Denny’s Corporation (NASDAQ: DENN) is also a client of Edwards, which acts as an advisor for overseas expansion. Yum! Brands, Inc. (NYSE: YUM) has further indicated that its expansion plans will not be hindered by the protectionism policy; however, it will be an uphill task to maintain the quality of its products to compete with smaller enterprises. Some of the companies that are going to be affected by the new directive include PT Fastfood Indonesia as it has more than 400 KFC outlets operating in the country.  Dunkin Brands has also managed to open about 600 franchised stores in Indonesia.

Quick service stocks at caviar prices

Unfortunately, none of the stocks making entryways into new markets are trading at attractive multiples:

Denny’s Corporation (NASDAQ: DENN)’s may appear cheap based on valuation, but it has a negative accounting value for its equity, and stocks with this condition have underperformed as a group. Darden Restaurants, Inc. (NYSE:DRI) is more reasonably priced, but it is hardly compelling as an investment. None of the growth story stocks mentioned even get near it on a price-to-sales or a price-to-earnings basis. As a whole, restaurants stocks seem to be pricey right now.

Conclusion

Investors should wait for valuation multiples to cool for these stocks before considering them as buy candidates.

The article Quick Service Food Stocks Are Trading at Caviar Prices originally appeared on Fool.com.

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