3 Best Restaurant Stocks to Buy Now: September 2023
The restaurant industry is experiencing a resurgence in consumer demand as hospitality economies have fully recovered from the pandemic-induced downturn. This renewed interest in dining out is driving substantial revenue growth for many companies, assembling them potentially the best restaurant stocks.
In March, the National Retail Federation (NRF) predicted a retail sales expansion of 4% to 6% for 2023. According to NRF’s estimates, the total retail sales volume is expected to range from $5.13 trillion to $5.23 trillion within this year. The restaurant sector has a significant share of this market, offering growth potential and additional incentives for investors in dividend payouts. These dividends can be especially attractive in a low-interest-rate environment.
The growing trend of food delivery services has provided an additional revenue stream for restaurant companies. This trend has been accelerated by changing consumer habits during the pandemic and is likely to continue to evolve. Restaurant stocks often benefit from seasonality, with increased business during holidays and special occasions, which can result in short-term boosts in revenue and profitability.
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Domino’s (DPZ)
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Domino’s (NYSE:DPZ) has demonstrated strong performance in the past three months within the restaurant stocks sector, with a notable monthly gain of 25%. This robust performance is attributed to several factors that have contributed to the company’s growth and investor confidence.
DPZ’s focus on expanding its presence in high-growth global markets has been a key driver of its success within the restaurant stocks sector. The company’s international growth has remained strong and diversified backed by its unit-level economics. During the Q2 2023, DPZ added 27 new stores in the U.S. and 170 new stores internationally.
Domino’s has heavily invested in technology-driven initiatives within the restaurant stocks sector, including digital ordering, which has played a pivotal role in bolstering its sales. The company has also initiated the rollout of electric vehicles for pizza delivery, enhancing speed, accuracy, and efficiency. These investments have the potential to further improve customer experience and drive sales growth.
DPZ has been facing increased expenses, particularly in areas such as commodity, labor, and energy costs, which have had an adverse impact on its margins. Despite the challenges, Domino’s Pizza, Inc. has exhibited impressive growth within the restaurant stocks sector, and its strategic initiatives, strong comparable sales, and digitalization efforts position it as a compelling investment option within the restaurant stocks sector. However, investors should remain vigilant and monitor factors such as cost pressures that may affect the company’s future performance.
Carrols Restaurant (TAST)
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Carrols Restaurant Group, Inc. (NASDAQ:TAST) has garnered significant attention and interest as a notable stock within the best restaurant stocks sector that has been exhibiting substantial price strength and positive momentum. Within a 12-week timeframe, TAST has showcased a robust and noteworthy price increase, demonstrating a yearly gain of 234%. This price surge not only reflects investors’ willingness but also their eagerness to pay a premium for TAST shares, which is a promising sign of positive sentiment circulating within the restaurant stocks sector.
To thoroughly assess the strength of this bullish trend, it’s essential to scrutinize shorter time frames. Over the past four weeks alone, TAST has registered a price uptick of 19% and 222% for 1-month and 6-month periods respectively. This not only affirms the stock’s strong momentum but also suggests that investors remain highly confident and optimistic about its future prospects in the restaurant stocks sector.
Furthermore, TAST is currently trading at approximately 90% of its 52-week high-low range, indicating that it may be on the brink of a significant breakout. In the context of the restaurant stocks sector, when a stock is trading in proximity to its 52-week high, it often signifies a prevailing bullish sentiment among investors and hints at the potential for further price appreciation.
Rave Restaurant (RAVE)
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Rave Restaurant (NASDAQ:RAVE) has been catching the eye of savvy investors with its earnings per share growth trajectory which has surged from $0.12 to $0.55 within a single year. This substantial uptick in EPS underscores the company’s ability to consistently generate profits, potentially enhancing the long-term value proposition for shareholders.
Additionally, Rave has demonstrated its prowess in revenue growth, signaling its adeptness at expanding its top-line performance effectively. While there has been a slight dip in EBIT (earnings before interest and tax) margins, the overarching trend of revenue growth underscores Rave Restaurant Group’s capability to capitalize on various growth opportunities within its sector.
One noteworthy development for potential investors is the significant share purchase by Brandon Solano, the company’s President. Solano acquired Rave Restaurant Group shares at an approximate price of US$1.57 per share, totaling an investment of around US$39,000. Insider buying of this magnitude often serves as a positive indicator, signaling that key insiders believe the company’s stock is undervalued and has substantial growth potential.
However, it is crucial to bear in mind that Rave Restaurant Group is not a large corporation, with a relatively modest market capitalization of $29 million. Smaller companies, such as Rave, may come with elevated investment risks, necessitating a thorough evaluation of the company’s financial stability and the resilience of its balance sheet before making investment decisions.
On the date of publication, Julia Magas did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Julia Magas is a writer who covers the latest trends in finance and technology. Her work is published in a number of financial media outlets such as Nasdaq, Cointelegraph, Investing, SeekingAlpha, FXEmpire, and Beincrypto. She primarily covers cryptocurrency and blockchain technology with a focus on market performance, innovations and trends.
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