Top Restaurant Stocks for Q2 2022

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. While business has begun to rebound, financial pressure increased sharply on restaurants and restaurant chains during the COVID-19 pandemic as many of them faced rising costs, mounting debt, and falling sales. Some of the best-known publicly traded restaurants include McDonald's Corp. and Chipotle Mexican Grill Inc.

The restaurant industry, represented by the Dow Jones U.S. Restaurants & Bars Index, has underperformed the broader market with a total return of -4.1% over the past 12 months, as of March 10, 2022. By comparison, the Russell 1000's total return over the same period is 8.3%. All statistics in the tables below are also as of March 10, 2022.

Here are the top 3 restaurant stocks with best value, fastest growth, and most momentum.

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.

Source: YCharts

• Bloomin Brands Inc.: Bloomin Brands is a holding company that owns and operates a variety of casual and fine dining restaurants. The company's portfolio of restaurants include Outback Steakhouse, Carrabba's Italian Grill, and Bonefish Grill, among others. Bloomin Brands' Q4 2021 ended Dec. 26, 2021. For that quarter, the company reported net income of $63.2 million compared with net loss for the prior-year quarter, as well as 28.9% year-over-year (YOY) revenue growth. Higher comparable restaurant sales from recovery of in-restaurant dining and strong retention of off-premises sales helped to fuel performance.
• 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 in the U.S. and Canada. On March 8, the company announced the completion of its previously-announced acquisition of Del Taco Restaurants Inc. for approximately $585 million.
• Brinker International Inc.: Brinker International owns, operates, and franchises the restaurant brands Chili's Grill & Bar and Maggiano's Little Italy, as well as virtual brands. The company operates principally in the U.S.

Fastest Growing Restaurant Stocks

These are the top restaurant stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and their most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.

Source: YCharts

• Ruth's Hospitality Group Inc.: Ruth's Hospitality Group owns and operates Ruth's Chris Steak House restaurants. It also sells franchise rights for that restaurant. Ruth's has locations throughout the U.S. and internationally. For Q4 2021, ended Dec. 26, 2021, net income climbed nearly 10-fold on strong revenue growth YOY. Net income was positively impacted by an income tax benefit related to the impact of discrete income tax items.
• Denny's Corp.: Denny's operates a franchised full-service restaurant chain through its subsidiary, Denny's Inc. Denny's restaurants offer items including breakfast-all-day foods, burgers, sandwiches, salads, and various beverages, appetizers, and desserts.
• Luckin Coffee Inc.: Luckin Coffee is a China-based holding company which operates a coffee retail business. The company operates primarily through mobile apps and pick-up stores and sells drinks, juices, and light meals. The company announced in early march that its provisional liquidation had come to a successful close following an order of the Grand Court of the Cayman Islands. Luckin Coffee chairman and CEO Dr. Jinyi Guo said that the development allows the company to "significantly reduce [its] debt burden and improve [its] capital structure." Luckin Coffee had negative EPS for the quarter in question, making an EPS growth figure irrelevant in this case.

Restaurant Stocks With the Most Momentum

These are the restaurant stocks that had the highest total return over the last 12 months.

Source: YCharts

• Luckin Coffee Inc.: See company description above.
• Arcos Dorados Holdings Inc.: Arcos Dorados Holdings is a Uruguay-based McDonald's franchisee. It operates over 2,250 restaurants across 20 Latin American and Caribbean countries, making it the largest independent McDonald's franchisee in the world.
• Papa John's International Inc.: Papa John's International operates and franchises pizza delivery and carryout restaurants. The company also operates dine-in and delivery restaurants in selected markets.

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