From fast food to fine dining, restaurants play a vital societal role. 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 4.1% over the past six months. This drawdown is a stark contrast from the S&P 500’s 8.4% gain.
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: $508.4 million
Operating a franchise model, Dine Brands (NYSE: DIN) is a casual restaurant chain that owns the Applebee’s and IHOP banners.
Why Do We Steer Clear of 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 6.7 percentage points
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Dine Brands is trading at $33.89 per share, or 7.6x 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: $230.4 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 Are We Positive On MCD?
- Bold push to open new restaurants demonstrates an ambitious strategy to establish itself in underpenetrated territories
- Highly-profitable franchise model results in strong unit economics and a best-in-class gross margin of 57%
- MCD is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its growing cash flow gives it even more resources to deploy
McDonald’s stock price of $323.47 implies a valuation ratio of 24.9x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
Arcos Dorados (ARCO)
Market Cap: $1.80 billion
Translating to “Golden Arches” in Spanish, Arcos Dorados (NYSE: ARCO) is the master franchisee of the McDonald's brand in Latin America and the Caribbean, responsible for its operations and growth in over 20 countries.
Why Is ARCO Interesting?
- New restaurant openings and solid same-store sales performance have boosted its top-line growth
- Same-store sales growth averaged 21.9% over the past two years, showing it’s bringing new and repeat diners into its restaurants
- Revenue base of $4.56 billion gives it economies of scale and some negotiating power with suppliers
At $8.32 per share, Arcos Dorados trades at 7.4x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
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.
