What the Business Does
Restaurant Brands International Inc. (QSR) operates in the consumer cyclical sector, specifically within the restaurant industry. The company owns a diverse portfolio of well-known brands, including Burger King, Tim Hortons, and Popeyes. With approximately 29,000 restaurants spread across 100 countries, QSR leverages its global footprint to drive revenue growth, which has seen a compound annual growth rate (CAGR) of 13.23% over the past five years.
The Buffett-Framework Verdict
According to the Buffett framework, QSR scores a "C" with a score of 44, indicating a cautious stance towards long-term investment. The operating margin of 25.2% is a standout strength, placing it in the top quintile within the sector. Consistent profitability and strong cash conversion, with a free cash flow to net income ratio of 1.87, further highlight its operational efficiency. However, concerns arise from a high net debt to EBITDA ratio of 5.71, suggesting significant leverage risk. Additionally, the return on invested capital (ROIC) at 8.03% falls short of the sector's top quintile and the universal Buffett threshold.
For more insights, see the Buffett verdict.
Valuation and Margin of Safety
Currently priced at $79.26, QSR's stock has a price-to-earnings (P/E) ratio of 27.6. This valuation suggests the market expects high growth from the company, despite a five-year earnings per share (EPS) CAGR of -3.4%. The stock's analyst target is $83.71, which is close to its 52-week high of $81.96, indicating limited upside potential. The dividend yield stands at 3.31%, providing some income for investors.
Explore more on the QSR stock page.
The Bull Case
The bull case for QSR hinges on its strong brand portfolio and global presence, which provide a robust platform for future growth. The company's revenue growth of 13.23% over the past five years underscores its ability to expand and capture market share. Additionally, the operating margin and cash conversion metrics are positive indicators of operational efficiency.
The Bear Case
On the flip side, QSR's high leverage, with a net debt to EBITDA ratio of 5.71, poses a significant risk. The low ROIC of 8.03% and declining EPS over the past five years highlight potential challenges in sustaining profitability and growth. Furthermore, the current ratio of 0.99 raises concerns about short-term liquidity.
The Bottom Line
Restaurant Brands International presents a mixed investment case in 2026. While its strong operating margin and revenue growth are attractive, concerns around high leverage and declining earnings cannot be ignored. Investors should weigh these factors carefully and consider their risk tolerance before investing.
This is educational, not financial advice.