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For those looking to put capital to work in the Canadian stock market, there are numerous options across various sectors, from energy to financials and materials. However, one TSX consumer stock that often flies under the radar despite its significant potential is Restaurant Brands International (TSX:QSR). As the parent company of iconic brands like Tim Hortons, Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs, Restaurant Brands International continues to demonstrate impressive growth and resilience, making it a compelling choice for long-term investors.
Restaurant Brands International (TSX:QSR) boasts an impressive existing footprint, with 28,000 eateries across 100 countries as of 2021. This vast network generated approximately $35 billion in revenue annually. However, the company is not resting on its laurels. Over the next five years, Restaurant Brands International plans to open 7,000 new locations worldwide, focusing primarily on markets where it has already seen success. This ambitious expansion strategy aims to increase total sales for all restaurants to $60 billion by 2028, with an adjusted operating income target of $3.28 billion. For long-term investors, this growth trajectory signals potential for substantial returns.
Restaurant Brands International's recent financial performance underscores its growth potential. The company's system-wide sales increased by an impressive 8.1% in the past year. Income from operations rose significantly, reaching $544 million, compared to $447 million the previous year. Net income also saw a notable increase, climbing from $277 million to $328 million year-over-year. These figures highlight the company's robust financial health and its ability to generate consistent revenue growth.
Moreover, diluted earnings per share (EPS) increased from $0.61 to $0.72, reflecting strong profitability. Although adjusted diluted EPS saw a slight decline of 0.9% to $0.73, this minor reduction does not overshadow the overall positive trend in the company's financial performance. Adjusted operating income increased by 7.7% to $540 million, showcasing solid organic growth.
Currently, QSR stock trades at approximately 21 times future earnings. In the first quarter of 2024, the company’s sales climbed by 8% to $1.74 billion, exceeding the forecasted $1.7 billion. The EPS of $0.73 also surpassed the estimate of $0.72. With $12.3 billion in net debt, QSR maintains a 4.8 times net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio, down from 5.1 times the previous year. This improved debt ratio indicates prudent financial management and a focus on maintaining a healthy balance sheet.
With the exception of Firehouse Subs, a recent acquisition, all brands under Restaurant Brands International have shown strong sales performance. The company anticipates a 5% growth in the number of restaurants and a 3% increase in sales annually until the fiscal year 2028. These long-term objectives reflect the company’s strategic vision and commitment to sustained growth.
Overall, Restaurant Brands International’s recent performance and forward outlook suggest that it is a solid investment choice. Despite a recent dip in stock price, the company’s valuation remains attractive compared to other restaurant stocks. For investors looking to add a resilient and growth-oriented stock to their portfolio, QSR offers a compelling opportunity with its robust expansion plans, strong financial performance, and strategic market positioning.
Restaurant Brands International’s combination of iconic brands, ambitious growth targets, and strong financial metrics positions it as one of the best TSX stocks to buy for long-term upside. As the company continues to expand and capitalize on its established market presence, investors can look forward to potential substantial returns and steady growth.
