Is There Value in Restaurant Brands International After Drive-Thru Modernization News?

• Wondering if Restaurant Brands International is trading at a bargain or looks overheated? You are not alone; we are diving into what its numbers tell us about value right now.
• The stock is up 2.7% in the last week and has climbed 9.6% over the past month, which suggests shifting sentiment and renewed interest in its growth story.
• Headlines have focused on the company’s bold expansion efforts and ongoing brand revamps. Investors hope these changes could propel future sales. The buzz was fueled by recent announcements about drive-thru modernization and new international partnerships.
• Right now, Restaurant Brands International scores a 2 out of 6 on our undervaluation checks. Let’s break down what this means by looking at a few tried-and-true valuation methods, and stick around for a more nuanced take at the end of the article.

Restaurant Brands International scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Restaurant Brands International Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's true value by projecting its future cash flows and discounting them back to their present value. This approach attempts to answer the question: how much are Restaurant Brands International’s future profits worth today?

Currently, Restaurant Brands International generates Free Cash Flow (FCF) of about $1.3 Billion. Analyst projections cover several years ahead, forecasting FCF to grow steadily and reach over $2.3 Billion by 2028. Cash flows beyond this time frame are extrapolated with long-term estimates suggesting nearly $3.6 Billion in FCF by 2035, according to Simply Wall St’s model.

Applying the 2 Stage Free Cash Flow to Equity model, the DCF analysis produces an intrinsic value of $89.13 per share. This is around 18.8% higher than the company’s current share price. This figure indicates that Restaurant Brands International may be undervalued by the market at the moment.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Restaurant Brands International is undervalued by 18.8%. Track this in your watchlist or portfolio, or discover 920 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Restaurant Brands International.

Approach 2: Restaurant Brands International Price vs Earnings

The Price-to-Earnings (PE) ratio is widely considered the go-to valuation tool for profitable companies like Restaurant Brands International. It offers a quick snapshot of how much investors are willing to pay for each dollar of current earnings, helping to gauge if a stock price reflects realistic growth and profitability expectations.

Determining what qualifies as a “normal” or “fair” PE ratio is not one-size-fits-all. Companies with stronger growth prospects or more stable profit streams typically justify higher PE multiples, while those with greater risks or slower growth often deserve a lower price tag. Market context, sector trends, and company-specific risks all have sway.

Restaurant Brands International currently trades at a PE ratio of 25.5x. This compares to an industry average PE of 21.4x and a peer group average of 24.3x. This suggests the company trades at a modest premium to its competitors and the hospitality sector as a whole.

Simply Wall St’s “Fair Ratio” adds another layer of insight; for Restaurant Brands International, this proprietary metric is 29.2x. Unlike broad industry or peer benchmarks, the Fair Ratio better incorporates the company’s actual earnings growth, profitability, risk profile, industry category, and market cap, offering a more tailored view of valuation.

With Restaurant Brands International’s actual PE ratio (25.5x) sitting below its Fair Ratio (29.2x), the stock appears undervalued on this metric. This assessment is further supported when adjusting for the company’s distinctive qualities.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Restaurant Brands International Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personalized story about a company, showing how you see its future playing out in numbers based on your views of sales growth, profit margins, risks, and opportunities. Narratives bridge the gap between headlines and hard data, transforming your insights or expectations for Restaurant Brands International into an actionable financial forecast and fair value estimate.

This user-friendly tool is available to everyone on Simply Wall St within the Community page, where millions of investors compare, share, and update their outlooks on companies like Restaurant Brands International. Narratives empower you to make buy or sell decisions by revealing how your calculated Fair Value stacks up against the current Price. The information stays up to date as news, earnings, or new market events arrive, so your story is updated automatically.

For instance, among current Narratives for Restaurant Brands International, some investors predict major upside from China expansion and see Fair Value above $93 per share, while others remain cautious about global competition and set Fair Value closer to $60. Each viewpoint is backed by unique assumptions, so you can quickly find the scenario that best matches your outlook.

Do you think there's more to the story for Restaurant Brands International? Head over to our Community to see what others are saying!

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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