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. The failure rate of restaurants may accelerate due to the COVID-19 pandemic. Although some level of indoor dining is now permitted in every state, it's unclear how quickly patrons will return with health risks still lingering. Some of the best-known publicly traded restaurants include McDonald's Corp. (MCD) and Chipotle Mexican Grill Inc. (CMG).

The restaurant industry, represented by the Dow Jones U.S. Restaurants & Bars Index, has underperformed the broader market with a total return of 55.2% over the past 12 months, as of March 15, 2021. By comparison, the Russell 1000's total return over the past year is 66.1%, as of March 12, 2021. All statistics in the tables below are as of March 15, 2021.

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.

Best Value Restaurant Stocks
  Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
Jack In The Box Inc. ( JACK) 105.49 2.4 18.3
Domino's Pizza Inc. ( DPZ) 361.11 14.0 29.1
El Pollo Loco Holdings Inc. ( LOCO) 19.21 0.7 30.0

Source: YCharts

  • 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.
  • Domino's Pizza Inc.: Domino's Pizza operates company-owned and franchise pizza stores under the same name throughout the U.S. and other countries. It also operates dough manufacturing and distribution centers. The company announced in late February financial results for its 2020 fiscal year (FY), which ended January 3, 2021. Net income rose 22.6% as revenue climbed 13.8%. Domino's said that it generated more than 70% of its U.S. sales from digital channels.
  • El Pollo Loco Holdings Inc.: El Pollo Loco Holdings owns and operates a chain of fast food restaurants. El Pollo Loco restaurants offer chicken meals, bowls, salads, soups, rice, and related items throughout the U.S. The company recently announced financial results for FY 2020, which ended December 30, 2020. Net income fell 1.7% as revenue declined 3.7%. El Pollo Loco said that it continues to be significantly impacted by the pandemic. About 80% of its restaurants still operate with closed dining rooms.

Fastest Growing Restaurant Stocks

These are the restaurant stocks with the highest year-over-year (YOY) operating income, also called operating earnings, 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. Operating income excludes non-operating income and expenses (such as investment gains or losses), one-time items, as well as interest and taxes. This helps investors get a clearer picture at the strength of the underlying business without the effect of unusual one-off events, such as large tax credits, asset sales, or lawsuit settlements. If you decided to invest in a company, it's still important to look at these one-off non-operating expenses and incomes, as they can still influence a company's overall financial health.

Fastest Growing Restaurant Stocks
  Price ($) Market Cap ($B) Operating Income Growth (%)
Yum China Holdings Inc. ( YUMC) 61.18 25.7 94.2
The Wendy's Co. ( WEN) 20.51 4.6 60.6
Chuy's Holdings Inc. ( CHUY) 43.63 0.9 54.9

Source: YCharts

  • Yum China Holdings Inc.: Yum China Holdings is a China-based operator of restaurant chains, including Kentucky Fried Chicken (KFC) and Pizza Hut. Its restaurants serve a variety of food items, such as pizza, pasta, rice dishes, fried chicken, soups, and vegetables.
  • The Wendy's Co.: Wendy's owns, operates, and franchises a chain of fast-food restaurants throughout the U.S. and other countries. Its restaurants serve hamburgers, chicken sandwiches, nuggets, chili, baked potatoes, French fries, salads, and more. The company recently announced financial results for FY 2020, which ended January 3, 2021. Net income fell 14.0% even as revenue rose 1.5%. Net income in FY 2019 benefitted from a significant gain in investment income. Wendy's noted that customer traffic in its restaurants was down due to the pandemic.
  • Chuy's Holdings Inc.: Chuy's Holdings owns and operates full-service restaurants serving a unique menu of authentic Mexican and Tex-Mex inspired food. Its menu includes enchiladas, fajitas, tacos, burritos, combination platters, soups, salads, and more.

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 (%)
RCI Hospitality Holdings Inc. ( RICK) 70.86 0.6 547.4
Red Robin Gourmet Burgers Inc. ( RRGB) 37.73 0.6 377.0
Brinker International Inc. ( EAT) 76.15 3.5 343.2
Russell 1000 N/A N/A 66.1
Dow Jones U.S. Restaurants & Bars Index N/A N/A 55.2

Source: YCharts

  • RCI Hospitality Holdings Inc.: RCI Hospitality Holdings is a holding company engaged in hospitality and related services. Through its subsidiaries, the company owns and operates night clubs that offer adult entertainment, dining, and bar operations throughout the U.S. The company also operates media and websites related to its other businesses.
  • Red Robin Gourmet Burgers Inc.: Red Robin Gourmet Burgers owns, operates, and franchises a chain of full-service restaurants throughout the U.S. and Canada. Its restaurants serve gourmet burgers, salads, soups, appetizers, seafood, and more. The company recently announced financial results for FY 2020, which ended December 27, 2020. Red Robin's net loss widened to $276.1 million from $7.9 million in FY 2019. Revenue for the year fell 33.9%. The company said that the decline in revenue was primarily due to the impact of the pandemic.
  • Brinker International Inc.: Brinker International owns, operates, and franchises Chili's Grill and Bar and Maggiano's restaurant brands throughout the U.S. and other countries. Its restaurants serve burgers, ribs, salads, steaks, classic Italian fare, and more.

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