The restaurant industry has seen healthy growth over the past few decades in the United States, thanks to the expansion of e-commerce/online platforms, on-the-go food services, packaging innovations, increasing disposable income, etc. Moreover, dining out is one of the most popular recreational spendings.
On top of it, app-enabled food delivery services have become a core part of the restaurant business, helping expand customer bases. Online food ordering and restaurant delivery have grown over 20% over the last five years. Moreover, online food delivery rates are expected to grow to more than $220 billion by 2025.
The growing online delivery services have also led to the growth of ghost kitchens (or cloud/dark kitchens), cooking facilities that are set up for the sole purpose of preparing food for delivery orders. Euromonitor predicts that the entire ghost kitchen market will be worth $1 trillion by 2030
Given the steady prospects of the industry, fundamentally sound restaurant stocks Bloomin’ Brands, Inc. (BLMN), Dine Brands Global, Inc. (DIN), and Rave Restaurant Group, Inc. (RAVE) might be wise additions to your portfolio this month.
Bloomin’ Brands, Inc. (BLMN)
BLMN owns and operates casual, upscale casual, and fine dining restaurants. Its restaurant portfolio has four concepts, Outback Steakhouse, a casual steakhouse restaurant; Carrabba’s Italian Grill, a casual Italian restaurant; Bonefish Grill; and Fleming’s Prime Steakhouse & Wine Bar, a contemporary steakhouse.
On September 15, BLMN and Grubhub announced they are expanding their partnership to bring all Bloomin’ Brands’ concepts to the Grubhub Marketplace. All BLMN concepts will be available on Grubhub for pickup or delivery.
Sheilina Henry, Senior Vice President of Diversity, Equity & Inclusion and Off-Premises Dining at BLMN, said, “This amplified partnership allows us to continue to expand our omnichannel off-premises approach and bring our well-known, favorite brands to even more guests,”
For the third quarter ended September 25, 2022, BLMN’s total revenue increased 4.5% year-over-year to $ 1.06 billion. Its net income increased 554.3% year-over-year to $33.05 million, while its earnings per share increased to 1033.3% year-over-year to $0.34.
Street expects BLMN’s EPS for the fiscal fourth quarter ended December 2022 to rise 7.2% year-over-year to $0.64. Its revenue is likely to grow 7.3% from the prior-year quarter to $1.12 billion. The company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
BLMN’s trailing-12-month levered FCF of 5.08% is 276.53% higher than the industry average of 1.35%. Its trailing-12-month ROCE of 52.50% is 311.59% higher than the industry average of 12.76%.
BLMN’s shares have gained 31.7% over the past six months to close its last trading session at $21.67. It gained 5.1% intraday.
BLMN’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BLMN has a B grade for Value and Quality. The stock is ranked #13 out of 47 B-rated Restaurants industry.
Click here to access additional grades for Growth, Momentum, Stability, and Sentiment for BLMN.
Dine Brands Global, Inc. (DIN)
DIN owns, franchises, operates, and rents full-service restaurants. It operates through five segments: Applebee’s Franchise Operations; International House of Pancakes (IHOP) Franchise Operations; Rental Operations; Financing Operations; and Company-Operated Restaurant Operations.
On December 5, DIN announced that it had agreed to acquire Fuzzy’s Taco Shop from Experiential Brands LLC for $80 million in cash. Fuzzy’s Taco Shop is a compelling business with a loyal customer base and a distinct identity and will be a complementary addition to the company’s highly franchised portfolio.
On December 2, 2022, DIN declared a quarterly cash dividend of $0.51 per share of common stock, payable on January 6, 2023. Its annual dividend of $2.04 yields 2.99% on the prevailing price, while its four-year average yield is 2.44%.
DIN’s total revenue increased 2% year-over-year to $233.22 million in the fourth quarter ended September 30, 2022. Its total franchise revenue increased by 2.3% to $164.91 million. Also, the company’s gross profit for the same quarter stood at $94.331 million, and earnings per share amounted to $1.32.
Analysts expect DIN’s EPS to increase 19.7% year-over-year to $1.84 in the fiscal first quarter ended March 2023. Also, its revenue is expected to come in at $202.55 million. It has surpassed its consensus EPS estimates in each of the trailing four quarters.
DIN’s trailing-12-month levered FCF margin of 9.73% is 620.44% higher than the industry average of 1.35%. Its trailing-12-month EBIT margin of 20.73% is 160.45% higher than the 7.96% industry average.
The stock has gained 3.1% over the past six months to close the last trading session at $68.25. Moreover, it gained 2.8% intraday.
DIN’s strong fundamentals are reflected in its POWR Ratings. DIN has an overall rating of B, which translates to Buy in our proprietary rating system.
It has a B grade for Value and Quality. The company is ranked #9 in the same industry.
To see the additional ratings for DIN’s Growth, Momentum, Stability, and Sentiment, click here.
Rave Restaurant Group, Inc. (RAVE)
RAVE operates and franchises pizza buffets, delivery/carry-out, and express restaurants under the Pizza Inn trademark in the United States and internationally. The company operates through three segments: Pizza Inn Franchising; Pie Five Franchising; and Company-Owned Restaurants.
For the first quarter that ended September 25, 2022, RAVE’s revenue increased 17.7% year-over-year to $3.01 million. Its net income increased 7.7% year-over-year to $307 thousand, while its income per share remained flat at $0.02. The company’s adjusted EBITDA for the same quarter improved by 25.8% year-over-year to $542 thousand.
In terms of its trailing-12-month gross profit margin, RAVE’s 68.58% is 92.79% higher than the industry average of 35.58%. Its trailing-12-month EBITDA margin of 18.08% is 63.04% higher than the 11.09% industry average.
The stock has gained 48.7% over the past six months and 60.2% over the past year to close the last trading session at $1.65.
It is no surprise that RAVE has an overall rating of A, which translates to Strong Buy in our proprietary rating system.
RAVE also has an A grade for Quality and a B grade for Value and Sentiment. It is ranked #4 in the same industry.
Beyond what we’ve stated above, we have also given RAVE grades for Momentum, Growth, and Stability. Get all RAVE ratings here.
BLMN shares were trading at $22.05 per share on Monday afternoon, up $0.38 (+1.75%). Year-to-date, BLMN has gained 9.59%, versus a 1.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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