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Tickers in this Article: DRI, EAT, DIN, MCD
Fast food chains will be in favor over the next year or two, but what about the full-service dining chains we love so much?

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Casual Dining is Half-Baked
As the economy makes its way back, consumers will spend a greater portion of their income on themselves, but not on extravagant high priced services or goods. A brand new Lexus or a home at the beach may not be in the cards, but a night out on the town could be. Therefore, casual dining chains could actually turn in some good revenue and earnings results in the months to come. (Though these two jobs are perceived as being opposites, the compensation can be quite comparable. Read more in Compensation Myths: Burger Flipper Vs. Investment Banker.)

But are better times to come already factored into some share prices?

Darden (NYSE:DRI) (Olive Garden/LongHorn) is a company that has potential. There is a reasonable chance it could hit a new high, which could attract new investors. It is also interesting that the company has exceeded estimates in three straight quarters.

It also has a reasonable chance of exceeding estimates when it releases its first-quarter results later his month. At present, the estimate is 66 cents, and it could beat that by two or three cents. It trades at 13-times this year's estimate, which is $2.81. With all of that said, it's unlikely that the shares have room to run from current levels.

Brinker International (NYSE:EAT) is a company that has a bright future too, as its Chili's concept is simply fabulous. It's also pulled back from just over $18, where it was trading in the earlier part of August. To its credit, it beat expectations in its second quarter and it trades at an alluring 12-times this year's estimate. Like Darden there is some upside potential here, as well.

DineEquity (NYSE:DIN): Applebees and IHOP are two appealing names, and these concepts give the company an excellent breakfast/lunch punch. It's also been beating earnings estimates by a fairly large margin. However, it is slightly more expensive, trading at about 14-times this year's estimate of $2.09.

Is Fast Food Still Viable?
It makes sense to get involved in the larger fast food plays. And among those, McDonalds (NYSE:MCD) continues to garner attention. It is expected to grow its EPS almost 9.8% from this year to the next, and continues to gain attention because of its $1 menu,. The company trades at an acceptable 14.5-times the 2009 estimate.

The Bottom Line
The casual dining space has upside in the next few years. And in spite of the run up in the major indexes, these stocks haven't gotten ahead of themselves. Actually, Darden is one to keep your eyes on. It's due out with its first-quarter numbers toward the end of the month. (For more, read Sinking Your Teeth Into Restaurant Stocks.)

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