From fast food to fine dining, restaurants play a vital societal role. But it’s not all sunshine and rainbows as they’re notoriously hard to run thanks to perishable ingredients, labor shortages, or volatile consumer spending. Unfortunately, these factors have spelled trouble for the industry as it has shed 3.5% over the past six months. This drawdown is a stark contrast from the S&P 500’s 10.6% gain.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here is one restaurant stock poised to generate sustainable market-beating returns and two that may face trouble.
Two Restaurant Stocks to Sell:
Restaurant Brands (QSR)
Market Cap: $22.79 billion
Formed through a strategic merger, Restaurant Brands International (NYSE: QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.
Why Does QSR Give Us Pause?
- Estimated sales growth of 4.4% for the next 12 months implies demand will slow from its six-year trend
- Efficiency has decreased over the last year as its operating margin fell by 4.5 percentage points
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Restaurant Brands’s stock price of $69.31 implies a valuation ratio of 17.8x forward P/E. Dive into our free research report to see why there are better opportunities than QSR.
The Cheesecake Factory (CAKE)
Market Cap: $3.03 billion
Celebrated for its delicious (and free) brown bread, gigantic portions, and delectable desserts, Cheesecake Factory (NASDAQ: CAKE) is an iconic American restaurant chain that also owns and operates a portfolio of separate restaurant brands.
Why Is CAKE Not Exciting?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Estimated sales growth of 3.9% for the next 12 months implies demand will slow from its six-year trend
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
The Cheesecake Factory is trading at $60.77 per share, or 15.3x forward P/E. To fully understand why you should be careful with CAKE, check out our full research report (it’s free).
One Restaurant Stock to Buy:
Chipotle (CMG)
Market Cap: $53.37 billion
Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE: CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.
Why Should You Buy CMG?
- Fast expansion of new restaurants to reach markets with few or no locations is justified by its same-store sales growth
- Same-store sales growth averaged 4.2% over the past two years, showing it’s bringing new and repeat diners into its restaurants
- Unparalleled revenue scale of $11.79 billion gives it advantageous pricing and terms with suppliers
At $40.27 per share, Chipotle trades at 34.9x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
Check out the high-quality names we’ve flagged in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
