While the S&P 500 is up 12.7% since June 2025, Restaurant Brands (currently trading at $69.81 per share) has lagged behind, posting a return of 5.9%. This might have investors contemplating their next move.
Is now the time to buy Restaurant Brands, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.
Why Is Restaurant Brands Not Exciting?
We're swiping left on Restaurant Brands for now. Here are three reasons why QSR doesn't excite us and a stock we'd rather own.
1. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Restaurant Brands’s revenue to rise by 4.3%, a deceleration versus This projection doesn't excite us and indicates its menu offerings will see some demand headwinds.
2. Shrinking Operating Margin
Operating margin is a key profitability metric because it accounts for all expenses keeping the business in motion, including food costs, wages, rent, advertising, and other administrative costs.
Looking at the trend in its profitability, Restaurant Brands’s operating margin decreased by 4.5 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its operating margin for the trailing 12 months was 23.9%.
3. High Debt Levels Increase Risk
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Restaurant Brands’s $15.64 billion of debt exceeds the $1.21 billion of cash on its balance sheet. Furthermore, its 5× net-debt-to-EBITDA ratio (based on its EBITDA of $2.89 billion over the last 12 months) shows the company is overleveraged.
At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Restaurant Brands could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.
We hope Restaurant Brands can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.
Final Judgment
Restaurant Brands isn’t a terrible business, but it isn’t one of our picks. With its shares trailing the market in recent months, the stock trades at 17.7× forward P/E (or $69.81 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at the Amazon and PayPal of Latin America.
Stocks We Like More Than Restaurant Brands
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. 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 have made our list 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-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
