Restaurants are go-to meeting hubs for friends, family, and colleagues. But the side dish is that they’re quite difficult to operate because high inventory and labor costs generally lead to thin margins at the store level. This leaves little room for error if demand dries up, and it seems like the market has some reservations as the industry has tumbled by 7.2% over the past six months. This drawdown was worse than the S&P 500’s 1.6% fall.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one resilient restaurant stock pinned to our Google Maps and two we’re swiping left on.
Two RestaurantStocks to Sell:
Starbucks (SBUX)
Market Cap: $106 billion
Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ: SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.
Why Is SBUX 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 4.3% for the next 12 months implies demand will slow from its six-year trend
- Day-to-day expenses have swelled relative to revenue over the last year as its operating margin fell by 3.6 percentage points
At $93.23 per share, Starbucks trades at 29.6x forward P/E. If you’re considering SBUX for your portfolio, see our FREE research report to learn more.
Papa John's (PZZA)
Market Cap: $1.65 billion
Founded by the eclectic John “Papa John” Schnatter, Papa John’s (NASDAQ: PZZA) is a globally recognized pizza delivery and carryout chain known for “better ingredients” and “better pizza”.
Why Should You Dump PZZA?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Estimated sales growth of 2.9% for the next 12 months implies demand will slow from its six-year trend
- Gross margin of 17.3% reflects the bad unit economics inherent in most restaurant businesses
Papa John’s stock price of $51.27 implies a valuation ratio of 24.8x forward P/E. Dive into our free research report to see why there are better opportunities than PZZA.
One Restaurant Stock to Watch:
CAVA (CAVA)
Market Cap: $8.62 billion
Starting from a single Washington, D.C. location, CAVA (NYSE: CAVA) operates a fast-casual restaurant chain offering customizable Mediterranean-inspired dishes.
Why Is CAVA Interesting?
- Fast expansion of new restaurants to reach markets with few or no locations is justified by its same-store sales growth
- Average same-store sales growth of 13.8% over the past two years indicates its restaurants are resonating with diners
- Free cash flow margin expanded by 7.9 percentage points over the last year, providing additional flexibility for investments and share buybacks/dividends
CAVA is trading at $74.60 per share, or 122.3x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
