Restaurants are go-to meeting hubs for friends, family, and colleagues. But it’s not all sunshine and rainbows as they’re notoriously hard to run thanks to perishable ingredients, labor shortages, or volatile consumer spending. Unfortunately, these factors have spelled trouble for the industry as it has shed 8% over the past six months. This drop was worse than the S&P 500’s 1% fall.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. On that note, here are two restaurant stocks boasting durable advantages and one we’re steering clear of.
One Restaurant Stock to Sell:
Dine Brands (DIN)
Market Cap: $340 million
Operating a franchise model, Dine Brands (NYSE: DIN) is a casual restaurant chain that owns the Applebee’s and IHOP banners.
Why Should You Dump DIN?
- Poor same-store sales performance over the past two years indicates it’s having trouble bringing new diners into its restaurants
- Efficiency has decreased over the last year as its operating margin fell by 4.3 percentage points
- High net-debt-to-EBITDA ratio of 7× could force the company to raise capital at unfavorable terms if market conditions deteriorate
Dine Brands is trading at $26.10 per share, or 5.5x forward P/E. Check out our free in-depth research report to learn more about why DIN doesn’t pass our bar.
Two Restaurant Stocks to Watch:
McDonald's (MCD)
Market Cap: $219.5 billion
With nicknames spanning Mickey D's in the U.S. to Makku in Japan, McDonald’s (NYSE: MCD) is a fast-food behemoth known for its convenience and broken ice cream machines.
Why Does MCD Stand Out?
- Rapidly increasing restaurant base reflects a desire to sell in new markets and scale quickly
- Attractive franchise model leads to wonderful unit economics and a best-in-class gross margin of 57.1%
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $310.45 per share, McDonald's trades at 23.6x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Chipotle (CMG)
Market Cap: $41.9 billion
Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE: CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.
Why Is CMG Interesting?
- Rapid rollout of new restaurants to capitalize on market opportunities makes sense given its strong same-store sales performance
- Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 2.9% over the past two years
- Unparalleled revenue scale of $11.93 billion gives it advantageous pricing and terms with suppliers
Chipotle’s stock price of $32.32 implies a valuation ratio of 28.6x 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
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662%. AppLovin before it ran 753%. Nvidia before it ran 1,178%. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
