Is Now the Right Moment for Restaurant Brands International After 11% Drop in Share Price?

If you have been eyeing Restaurant Brands International, ticker QSR, and asking yourself whether now is the right time to get in or out, you are definitely not alone. In a market where quick service restaurants have seen plenty of ups and downs, QSR's share price has made its own statement recently. Over the past month, the stock has slipped by nearly 11%, extending its softness over the last quarter and year. On the other hand, when we zoom out, QSR has still logged a respectable 36% total return over five years and about 18% over three years. This means long-term holders have seen real gains, even with the bumps along the way.

What makes the current moment especially interesting is the combination of conservative investor sentiment and signs of underlying strength. Despite the recent rough patch, annual revenue is up by more than 3% and net income has increased by 18%. Shares are also trading at a 28% discount to their calculated intrinsic value and about 20% below analyst price targets. This has sparked real debate about whether the market is undervaluing what QSR brings to the table. The numbers back this up: QSR scores a 5 out of 6 on the latest valuation assessment, meaning it passes nearly all the key undervaluation checks.

How are these valuation checks actually calculated, and what do they really say about QSR's future? In the next section, we will break down the major valuation approaches step by step and explore why there might be an even better way to make sense of QSR's true market value.

Restaurant Brands International delivered -6.6% returns over the last year. See how this stacks up to the rest of the Hospitality industry.

Approach 1: Restaurant Brands International Cash Flows

The Discounted Cash Flow (DCF) model estimates what a company should be worth today by projecting its future cash flows and discounting them back to their present value. This method helps investors judge if a stock is trading at a fair price compared to its real business potential.

Restaurant Brands International’s latest twelve months Free Cash Flow stands at $1.26 billion, and this number is expected to grow substantially over the coming decade. By 2027, analysts project Free Cash Flow will surpass $2 billion, and the ten-year outlook sees it rising steadily to about $3.9 billion by 2035. These projections are built into the two-stage Free Cash Flow to Equity model used here.

Based on this forward-looking analysis, the estimated intrinsic value per share for Restaurant Brands International is $88.07. Compared with the current market price, the DCF suggests the stock is 28.0% undervalued. This result indicates the market may not be fully appreciating the strength and growth potential of Restaurant Brands International’s cash generation.

Result: UNDERVALUED

Our DCF analysis suggests Restaurant Brands International is undervalued by 28.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks based on DCF analysis.

Approach 2: Restaurant Brands International Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used to value profitable companies because it directly links a company's current share price to its earnings. This provides a clear measure of what investors are willing to pay for each dollar of profit. For established businesses with consistent profits, the PE ratio is especially useful for comparing market expectations across firms and industries.

Growth expectations and risk can meaningfully affect what is considered a "normal" or "fair" PE ratio. Companies with higher growth expectations or those seen as lower risk often command a premium. In contrast, slower growth or riskier firms may trade at a discount. It is important to interpret a PE ratio in the context of both the company’s specific outlook and the broader sector.

Restaurant Brands International currently trades at a PE ratio of 24.1x, which is almost identical to the hospitality industry average of 24.0x and slightly lower than the average of its peers at 27.0x. According to Simply Wall St’s proprietary Fair Ratio, which incorporates factors such as future earnings growth, margins, and risks, QSR’s fair PE is estimated at 30.3x. Since the fair PE is considerably above the current multiple, this may indicate that the market is not giving the company full credit for its earnings power and growth profile at this time.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Restaurant Brands International Narrative

While numbers and ratios are useful, there is an even more powerful way to make investment decisions using what we call a Narrative. A Narrative is your story about a company, connecting real business developments such as international expansion or digital investments to future estimates of revenue, profit margins, and ultimately, fair value. Within Simply Wall St’s community, Narratives are easy to create and use, providing you with a structured way to link the company’s journey to your own forecast and valuation.

Narratives help you quickly see whether Restaurant Brands International aligns with your investment perspective by showing the gap between your fair value and the current market price, all based on your underlying assumptions about growth and risk. They update automatically as new data or news emerges, so your view stays relevant. For example, one Narrative for QSR might emphasize international franchising and digital innovation as drivers of high-margin, reliable growth and assign a fair value of $93. A more cautious Narrative might focus on persistent challenges and risks, resulting in a fair value closer to $60. Narratives make it easy for any investor to translate a viewpoint into a clear, actionable estimate and instantly compare it with the real-time market.

Do you think there's more to the story for Restaurant Brands International? Create your own Narrative to let the Community know!

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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