Darden Restaurants (DRI): A Fresh Look at Valuation Following Mixed Q3 Earnings and Guidance Update

Darden Restaurants (DRI) recently reported its third-quarter results, delivering revenue in line with forecasts. However, the company fell short on EBITDA and updated full-year earnings guidance, which led to a swift reaction from investors.

See our latest analysis for Darden Restaurants.

After a robust start to the year, Darden’s momentum has cooled, with its share price down over 13% in the past quarter as investors reacted to softer Q3 earnings and a revised outlook. Still, long-term holders have fared well, with a 36% total shareholder return over three years and over 83% over five years. This shows the restaurant giant’s staying power even amid short-term headwinds.

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This leaves investors wondering if Darden’s recent decline has created an attractive entry point, or if the market has already accounted for any signs of slowing growth in its current valuation. Could there be a bargain hidden here, or is future upside already priced in?

Most Popular Narrative: 18.9% Undervalued

Based on the most popular narrative, Darden Restaurants’ fair value stands well above the latest closing price. This suggests room for meaningful upside if the narrative’s assumptions come true.

Darden is testing new smaller prototypes for some brands, such as Yard House and Cheddar's Scratch Kitchen. These prototypes lower construction costs and expedite new restaurant openings, which could accelerate unit growth and enhance revenue and earnings.

Read the complete narrative.

Curious about the real drivers behind that premium fair value? The key is bold restaurant expansion plans and ambitious margins incorporated into future forecasts. Want to see which financial levers and strategic bets underpin this valuation? The story gets even more interesting inside the full narrative.

Result: Fair Value of $221.33 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, declining guest counts or economic headwinds could challenge Darden’s earnings momentum. This would test whether recent strategies are enough to offset these risks.

Find out about the key risks to this Darden Restaurants narrative.

Build Your Own Darden Restaurants Narrative

If you have a different perspective or want to dive into the numbers yourself, you can quickly develop your own viewpoint in just a few minutes. Do it your way

A great starting point for your Darden Restaurants research is our analysis highlighting 5 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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