Restaurants increase convenience and give many people a place to unwind. 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 1.4% over the past six months. This performance was discouraging since the S&P 500 returned 4.5%.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here is one resilient restaurant stock pinned to our Google Maps and two that may face trouble.

Two RestaurantStocks to Sell:

Shake Shack (SHAK)

Market Cap: $5.51 billion

Started as a hot dog cart in New York City's Madison Square Park, Shake Shack (NYSE: SHAK) is a fast-food restaurant known for its burgers and milkshakes.

Why Are We Cautious About SHAK?

1. Poor expense management has led to an operating margin of 0.6% that is below the industry average
2. Poor free cash flow margin of 1.6% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
3. Negative returns on capital show management lost money while trying to expand the business

Shake Shack’s stock price of $135.01 implies a valuation ratio of 102.9x forward P/E. If you’re considering SHAK for your portfolio, see our FREE research report to learn more.

Dine Brands (DIN)

Market Cap: $371 million

Operating a franchise model, Dine Brands (NYSE: DIN) is a casual restaurant chain that owns the Applebee’s and IHOP banners.

Why Do We Think DIN Will Underperform?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
2. Sales over the last six years were less profitable as its earnings per share fell by 10.1% annually while its revenue was flat
3. 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly

Dine Brands is trading at $23.90 per share, or 4.6x forward P/E. To fully understand why you should be careful with DIN, check out our full research report (it’s free).

One Restaurant Stock to Buy:

Wingstop (WING)

Market Cap: $9.11 billion

The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ: WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.

Why Is WING a Good Business?

1. Average same-store sales growth of 16.9% over the past two years indicates its restaurants are resonating with diners
2. Healthy operating margin of 25.3% shows it’s a well-run company with efficient processes
3. WING is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

At $326.01 per share, Wingstop trades at 82.1x forward P/E. Is now the right time to buy? Find out 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 6 Stocks for this week. 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 Exlservice (+354% 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

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