Restaurant Brands International, Inc. – Value Analysis (NYSE:QSR) : December 1, 2017

Capitalcube gives Restaurant Brands International, Inc. a score of 47.

Our analysis is based on comparing Restaurant Brands International, Inc. with the following peers – Jack in the Box Inc., Wendy’s Company, Sonic Corp. and McDonald’s Corporation (JACK-US, WEN-US, SONC-US and MCD-US).

Investment Outlook

Restaurant Brands International, Inc. has a fundamental score of 47 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It trades at a lower Price/Book multiple (1.97) than its peer median (4.88).
  • The market expects QSR-US‘s earnings to grow at about the same rate as its chosen peers and also does not seem to expect much improvement in its below peer median returns.
  • QSR-US employs relatively high amounts of assets while generating relatively median profit margins.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • QSR-US‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While QSR-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.
  • QSR-US seems to be constrained by the current level of debt.

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Leverage & Liquidity

QSR-US is debt-constrained.

  • With debt at a relatively high 40.66% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 40.66%), and interest coverage level of 3.66x, QSR-US seems debt-constrained.
  • All 4 peers for the company have an outstanding debt balance.

QSR-US has maintained its Some Capacity profile from the recent year-end.

  • QSR-US‘s interest coverage is similar to last year’s high of 3.70x, which compares to a low of 2.32x in 2014.
  • Compared to 2016, interest coverage has remained relatively stable for both the company (3.66x) and the peer median (3.67x).
  • QSR-US‘s debt-EV has increased 3.57 percentage points from last year’s low but is still below its five-year average debt-EV of 41.53.
  • The increase in its debt-EV to 40.66% from 37.09% (in 2016) was also accompanied by an increase in its peer median during this period to 40.66% from 37.09%.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Jack in the Box Inc. N/A 0.53 4.9 18.51
Wendy’s Company 45.56 1.8 2.71 8.55
Sonic Corp. N/A 1.52 3.67 14.53
McDonald’s Corporation 20.86 1.28 9.12 21.71
Restaurant Brands International Inc 40.66 3.45 3.66 12.18
Peer Median 40.66 1.52 3.67 14.53
Best In Class 20.86 3.45 9.12 21.71

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Company Profile

Restaurant Brands International, Inc. is a holding company, which engages in the operation of quick service restaurants. It operates through the Tim Hortons and Burger King segments. The Tim Hortons segment provides the donut, coffee, and tea restaurant services. The Burger King segment manages fast food hamburger restaurant. The company was founded on August 25, 2014 and is headquartered in Oakville, Canada.

Disclaimer

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