Restaurant Brands International, Inc. – Value Analysis (TORONTO:QSR) : December 4, 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 – Restaurant Brands International LP, Pizza Pizza Royalty Corp., Spot Coffee (Canada) Ltd. and McDonald’s Corporation (QSP.UT-CA, PZA-CA, SPP-CA 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

  • Taking peer performance into consideration, relative performance over the last month and last year is around the peer median.
  • It’s current Price/Book of 2.00 is about median in its peer group.
  • The market expects QSR-CA‘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-CA has relatively low profit margins and median asset efficiency.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • Over the last five years, QSR-CA‘s return on assets has declined from about median to less than the median among its peers suggesting that the company’s historical competitiveness in operations is slipping away.
  • The company’s margins are around the peer medians and do not suggest any benefit from a pricing or an operating cost advantage versus peers.
  • While QSR-CA‘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 is likely overinvesting in a business with only median returns.
  • QSR-CA seems to be constrained by the current level of debt.

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Leverage & Liquidity

QSR-CA 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 26.96%), and interest coverage level of 3.66x, QSR-CA seems debt-constrained.
  • All 4 peers for the company have an outstanding debt balance.

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

  • QSR-CA‘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 (3.77x).
  • QSR-CA‘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.
  • Though its debt-EV increased to 40.66% from 37.09% (in 2016), its peer median remained relatively stable during this period at 26.96%.
  • Relative to peers, debt-EV rose 3.57 percentage points.

Access the detailed analysis for Restaurant Brands International, Inc.

Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Restaurant Brands International LP 28.24 3.4 3.77 11.85
Pizza Pizza Royalty Corp. 7.99 2.62 39.27 59.17
Spot Coffee (Canada) Ltd. 26.96 0.3 -2.87 11.12
McDonald’s Corporation 20.86 1.28 9.12 21.71
Restaurant Brands International Inc 40.66 3.45 3.66 12.35
Peer Median 26.96 2.62 3.77 12.35
Best In Class 7.99 3.45 39.27 59.17

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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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