Should you buy or sell Restaurant Brands stock amid falling comparable sales?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 25, 2021
  • Restaurant Brands shares on Monday plunged nearly 4% after announcing its FQ3 results.
  • The company reported its most recent quarterly results, surpassing Street expectations.
  • However, QSR’s comparable sales fell across leading brands, putting the stock price under pressure.

On Monday, Restaurant Brands International Inc. (NYSE:QSR) shares plunged nearly 4% after announcing its most recent quarterly results. The company reported its fiscal Q3 revenue and earnings before markets opened, beating analyst expectations. However, QSR’s comparable sales fell across multiple brands adding pressure to the stock price.

The company posted FQ3 non-GAAP earnings per share of $0.76, beating the consensus Street estimate of $0.74. In addition, its GAAP EPS of $0.70, beating the average for analyst estimates of $0.69 while revenue for the quarter came in at $1.45 billion, $77 million ahead of estimates.

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The company’s top brands failed to match revenue growth estimates with Tim Horton’s reporting an 8.9% increase compared to an expectation of 9.74%. On the other hand, Burger King sales grew 7.9% versus the Street forecast of 10.1%, while Popeye’s fell by 2.4% compared to expected growth of 1.87%.

Should you bet on QSR’s long-term growth?

From an investment perspective, Restaurant Brands shares trade at reasonable trailing 12-month and forward P/E ratios of about 27.18 and 19.75, respectively. 

Moreover, analysts forecast its earnings per share to grow at an average annual rate of about 19% over the next five years.

Therefore, the company offers exciting growth prospects at reasonable valuation multiples, thus gaining the attention of long-term investors.

Source – TradingView

Technically, QSR shares trade within a descending channel formation in the intraday chart. As a result, the stock has pulled back towards the oversold conditions of the 14-day RSI.

However, with the stock yet to retest the trendline support, it could extend the current declines deep into oversold conditions.

Therefore investors could target extended declines at about $56.87 or lower at $53.96, while $62.92 and $65.52 are crucial resistance zones.

There is still time to sell

In summary, Restaurant Brands shares appear to have recently plummeted closer to oversold conditions. 

However, although the stock seems reasonably valued, the current decline is yet to retest the trendline support, leaving room for more downward movements.

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