I don’t think people will ever really get tired of restaurants. So that means that as an investor, you can’t ever afford to ignore restaurant stocks. According to the Portfolio Grader rankings, there are some great bargains to be had.
The average household in the U.S. spends a little more than $3,000 per year on restaurants. In June 2023, the restaurant industry took in $88.9 billion in revenue, according to the National Restaurant Association.
Absolutely, there’s big money to be made in restaurant stocks. Even as economists debate whether we are headed to a recession, Americans are stubbornly determined to dine in restaurants or order takeout.
Some of the best restaurant stocks you can buy are for fast-food restaurants because they cater to customers on the go.
The Portfolio Grader evaluated restaurant stocks based on several metrics, including earnings performance, momentum and analyst sentiment. All of these stocks are good picks at this point on the calendar.
Chipotle Mexican Grill (CMG)
Fortunately for shareholders, Chipotle Mexican Grill (NYSE:CMG) has gotten past the foodborne illness problems that plagued the stock at the beginning of the decade.
The stock’s been on a steady climb since 2020, now trading near record highs of more than $2,100 per share.
First-quarter earnings got a lot of attention. Chipotle’s net income jumped 84% from a year ago to $291.6 billion. Revenue of $2.4 billion was also up 17% from a year ago.
Chipotle rejects the franchise model that many fast-food restaurants favor, owning its 3,200 locations in the U.S., Canada, the U.K., France and Germany. That ownership helps it maintain quality standards.
The Tex-Mex chain, which offers burritos and rice bowls, is working with international franchise retail operator Alshaya Group to bring its restaurants to Dubai and Kuwait next year.
If those locations take hold, it could open up even more growth opportunities for CMG.
Chipotle stock is up 54% this year and has a “B” rating in the Portfolio Grader.
Sweetgreen (SG)
Sweetgreen (NYSE:SG) is a fast-casual restaurant that promotes a healthy lifestyle. The chain serves salads, bowls and seasonal dishes at nearly 1,000 stores in 20 U.S. states.
And the company’s growing rapidly. At the end of 2021, Sweetgreen had only 150 stores. But it’s taken off in major metropolitan markets in New York, California and Massachusetts, which collectively have more than half of the company’s properties.
Earnings in the first quarter had revenue of $125.06 million, up 21.9% from a year ago. And while the company isn’t profitable yet, the net loss of $33.66 million was an improvement of 33% from a year ago.
As much as some people appreciate a burger and a carton of French fries, demand for healthier food options continues to grow. Sweetgreen fills that void.
SG stock is up nearly 80% this year and has a “B” rating in the Portfolio Grader.
Wendy’s Company (WEN)
Now we’re back to the burger-and-fry set. Wendy’s Company (NASDAQ:WEN) is based in Columbus, Ohio, and has more than 7,000 locations.
It’s the third-largest burger chain in the U.S. and a top 10 restaurant company by size.
The company is consistently tinkering with its menu. It got into the breakfast business in 2020 and is making more than $3,000 per week per restaurant, creating a solid revenue stream.
Earnings for Q1 saw revenue of $528.8 million and EPS of 21 cents, better than analysts’ expectations for $522.4 million and 20 cents EPS.
And don’t forget Wendy’s impressive dividend yield of 4.7%. Investors can use that payout as extra income or reinvest it into their portfolios.
WEN stock gets a “B” rating in the Portfolio Grader.
Rave Restaurant Group (RAVE)
Rave Restaurant Group (NASDAQ:RAVE) owns two Dallas-based restaurant chains: Pizza Inn (dine-in restaurants) and Pie Five Pizza (fast-casual restaurants). It’s one of the restaurant stocks you might not know about on this list.
The Pizza Inn brand isn’t new, having begun 65 years ago. But the company is working on broadening its reach and repositioning it for expansion through a new design, updated branding and new products.
The company announced the second consecutive year of net unit growth of the Pizza Inn eateries.
“Last year marked our first unit count growth in 24 years, and this year marks the second. In my book, two data points make a trend that’s good for our franchisees. We’ve also had 12 consecutive quarters of profitability through this third quarter and an unbelievably positive response to our new store image.”
Revenue for the fiscal Q2 2023 included $2.86 million, up from $2.69 million a year ago. EPS was 2 cents per share, down a penny from a year ago.
RAVE stock is up 29% this year. But keep in mind; this is a small company. The market capitalization is less than $30 million.
The stock price is only $2 or so. With such penny stocks, price fluctuations can be pretty dramatic, so be cautious with your investment. It has a “B” rating in the Portfolio Grader.
McDonald’s (MCD)
You can say a lot about McDonald’s (NYSE:MCD), but one thing it decidedly is not is a small company.
McDonald’s is the OG of fast-food restaurants. It started in 1940 in San Berardino, California, and its first franchise in 1955. Now McDonald’s has more than 38,000 locations in 100 countries, with a market cap of $214 billion.
But you’ve got to give it to McDonald’s, they keep innovating. The company that first perfected consistent fast-food service wasn’t afraid to expand to all-day breakfast in 2015 (although that came to an end during the Covid-19 pandemic in a streamlining effort).
It competes with high-priced coffee chains with lower-priced offerings. It takes on restaurants specializing in spicy chicken sandwiches with its own version.
More recently, it made a lot of noise this year with its Grimace birthday promotion, which went viral on social media and did better than even McDonald’s executives anticipated.
Earnings for the first quarter included $5.9 billion in revenue and a net income of $1.8 billion, or $2.45 per share. And thanks to Grimace, I’m expecting even better numbers for Q2.
MCD stock is up 11% this year and has a dividend yield of 2%. It gets a “B” rating in the Portfolio Grader.
Shake Shack (SHAK)
Shake Shack (NYSE:SHAK) is a chain headquartered in New York.
While the company takes pride in its milkshakes, its signature item on the menu is its renowned Shackburger.
Now with more than 460 locations, Shake Shack operates in 30 U.S. states and the U.K., China, Kuwait, Mexico, Turkey, Japan, South Korea and elsewhere. It opened its first location in Thailand in April.
As a growing business, Shake Shack has been reporting EPS losses for several quarters, but the company says it’s committed to returning to profitability in 2023 while maintaining growth. Revenue in the first quarter was $253.3 million, up 24.5% from a year ago, with a net loss of $1.6 million., or 4 cents per share.
However, same-store sales were up 10.3% for the quarter, thanks to higher menu prices, and average weekly sales were up 7.4% year-over-year.
SHAK stock is up 90% this year and has a “B” rating in the Portfolio Grader, making it one of the restaurant stocks worth watching.
Yum Brands (YUM)
Yum Brands (NYSE:YUM) owns several of the most-popular fast-food names in the U.S. – KFC, Pizza Hut, Taco Bell and Habit Burger Grill. The company has more than 55,000 locations in 155 countries and territories.
Taco Bell, in particular, has a rabid following and does an excellent job engaging with its customer base.
For instance, it allows customers to vote on specific menu items, which is why the company is bringing back its beloved Beefy Crunch Taco with Flamin’ Hot Fritos back on the menu later this year.
Earnings in the first quarter were $1.64 billion, up 6% from a year ago. EPS was $1.05 per share.
YUM stock has a “B” rating in the Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
