On Monday, Scotiabank (TSX:BNS) made an adjustment to the stock price target for Restaurant Brands (TSX:QSP_u) International (NYSE:QSR), increasing it to $81 from the previous $80 while maintaining a "Sector Outperform" rating for the stock.
The adjustment reflects the company's solid performance in its home markets, with Burger King US and Tim Hortons Canada showing particular strength. Still, international markets have experienced a moderation in comparable sales growth and net restaurant growth (NRG).
According to Scotiabank, for the first quarter, Restaurant Brands International is expected to present a mixed picture, with domestic performance differing from that overseas. The expectations are largely in line with the consensus.
The firm noted that QSR's shares are currently trading at approximately a 5% discount versus the historical average and an approximately 11% discount compared to its industry peers in the International Hotel & Restaurant sector.
The analyst highlighted that the company's sustained same-store sales growth (SSSG), with improvements at Burger King US and healthy results from Tim Hortons Canada, along with a mid-4% NRG, should contribute to closing the valuation gap with its peers. This ongoing positive momentum in key performance indicators underpins the rationale for the price target increase.
Restaurant Brands International's stock performance is being closely watched by investors, particularly in light of the company's strategic efforts to bolster its domestic market presence while navigating the more challenging growth dynamics abroad.
The upgraded stock price target by Scotiabank signals confidence in the company's ability to maintain its growth trajectory and improve its market position.
InvestingPro Insights
Scotiabank's optimistic outlook on Restaurant Brands International (NYSE:QSR) is further reinforced by some key financial metrics and InvestingPro Tips. The company boasts a market capitalization of $23.36 billion USD, and its stock trades at a P/E ratio of 19.42, which is slightly adjusted to 18.77 when looking at the last twelve months as of Q4 2023. QSR's Price / Book ratio for the same period stands at 8.15, indicating a high valuation in terms of its book value.
InvestingPro Tips suggest that Restaurant Brands International has a track record of raising its dividend for 9 consecutive years and has maintained dividend payments for 10 consecutive years, which is a testament to its financial health and commitment to shareholder returns.
Still, the stock is trading at a high P/E ratio relative to near-term earnings growth, and it also trades at a high revenue valuation multiple. These factors could indicate that the stock is currently priced at a premium. Moreover, the company is expected to remain profitable, with analysts predicting profitability for this year, and it has been profitable over the last twelve months.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at: https://www.investing.com/pro/QSR. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of actionable insights that could further inform your investment decisions.
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