The restaurant industry ranges from local mom-and-pop eateries to national and international chains. The industry is notoriously difficult for business owners, with about 60% of new restaurants failing within their first year. One reason for this is that restaurant spending tends to be heavily discretionary, fluctuating dramatically with the broader economy. Restaurants as a group have not fared well during the COVID-19 pandemic. Many restaurants remain closed to service while millions of consumers confined at home are reluctant to dine out at the ones that are open. Some of the best-known publicly traded restaurants include McDonald's Corp. (MCD) and Chipotle Mexican Grill, Inc. (CMG).
The restaurant industry, as represented by the Dow Jones US Restaurants & Bars Index, has significantly underperformed the broader market. The index has provided 1-year trailing total returns of -0.1% as compared with the Russell 1000's total returns of 13.3% as of September 18. Restaurants with successful delivery or takeout operations, however, have done particularly well during this period. That is reflected in the top stocks of the restaurant industry below.
Here are the top 3 restaurant stocks with best value, fastest growth, and most momentum. All statistics below are as of September 21.
Best Value Restaurant Stocks
These are the restaurant stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
|Best Value Restaurant Stocks|
|Price ($)||Market Cap ($B)||12-Month Trailing P/E Ratio|
|Denny's Corp. (DENN)||10.48||0.7||12.2|
|Jack In The Box Inc. (JACK)||80.6||1.8||25.9|
|Restaurant Brands International Inc. (QSR.TO)||CA$73.95||CA$22.4||26.1|
- Denny's Corp.: Denny's Corp. operates restaurants under the Denny's name. The full-service family restaurant chain has locations throughout North America and in New Zealand, Costa Rica, and Guam.
- Jack In The Box Inc.: Jack In The Box operates and franchises restaurants of the same name. The chain serves hamburgers, sandwiches, salads, Mexican food, and related items, and operates the U.S. and Canada. For Q3 FY 2020, ended July 5, Jack In The Box year-over-year (YOY) same-stores sales increased 6.6% system-wide, which includes both company and franchise stores. The company announced that it would reinstate a quarterly cash dividend, with the next dividend of $0.40 per common share paid on September 3.
- Restaurant Brands International Inc.: Restaurant Brands International is among the largest global quick-service restaurant chains in the world, with operations in more than 100 countries. Its subsidiaries include Burger King, Popeyes Louisiana Kitchen, and Canadian coffee chain Tim Hortons. By the end of Q2, the company reported that it had achieved 90% of its prior year system-wide sales, with 93% of its restaurant locations open worldwide. CEO Jose Cil attributed the recovery in the midst of the COVID-19 pandemic to the company's robust drive through, delivery, and digital channels.
Fastest Growing Restaurant Stocks
These are the restaurant stocks with the highest YOY earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
|Fastest Growing Restaurant Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)|
|Papa John's International Inc. (PZZA)||82.35||2.7||220.0|
|Jack In The Box Inc. (JACK)||80.61||1.8||184.0|
|Wingstop inc. (WING)||132.73||3.9||129.4|
- Papa John's International Inc.: Papa John's operates and franchises pizza delivery and carry-out restaurants under the Papa John's name. The company operates in the U.S. and Canada.
- Jack In The Box Inc.: See above for company description.
- Wingstop Inc.: Wingstop operates a chain of restaurants specializing in chicken wings, sides, and related fast food items. For Q2 FY 2020, ended June 27, the company reported YOY domestic same-store sales growth of 31.9%. Digital sales increased to 63.7% of domestic sales.
Restaurant Stocks With the Most Momentum
These are the restaurant stocks that had the highest total return over the last 12 months.
|Restaurant Stocks With the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Domino's Pizza Inc. (DPZ)||397.59||15.6||63.7|
|Papa John's International Inc. (PZZA)||82.35||2.7||60.4|
|Wingstop Inc. (WING)||132.73||3.9||53.3|
|Dow Jones US Restaurants & Bars Index||N/A||N/A||-0.1|
- Domino's Pizza Inc.: Domino's Pizza operates both company-owned and franchise pizza restaurants under the Domino's Pizza name. Additionally, Domino's operates dough manufacturing and distribution centers both within and outside of the U.S. Thanks to its thriving "contactless" delivery, carryout, and carside delivery services, the company announced in August plans to hire 20,000 new employees to meet increased business needs during the pandemic.
- Papa John's International Inc.: See above for company description.
- Wingstop Inc.: See above for company description.
CNBC. "The No. 1 thing to consider before opening a restaurant." Accessed Sept. 21, 2020.
YCharts. "YCharts." Accessed Sept. 21, 2020.
Jack In The Box Inc. "Jack in the Box Inc. Reports Third Quarter FY 2020 Earnings; Reinstates Quarterly Cash Dividend." Accessed Sept. 21, 2020.
Restaurant Brands International Inc. "Restaurant Brands International Inc. Reports Second Quarter 2020 Results." Accessed Sept. 21, 2020.
Wingstop Inc. "Wingstop Inc. Reports Fiscal Second Quarter 2020 Financial Results." Accessed Sept. 21, 2020.
Domino's Pizza Inc. "Domino's® to Hire 20,000 New Team Members to Help Busy Stores Feed Hungry Families Nationwide." Accessed Sept. 21, 2020.