Darden Restaurants Inc (DRI, Financial) has recently shown a daily gain of 2.88% and a three-month gain of 13.1%, with an impressive Earnings Per Share (EPS) of 8.27. Investors may wonder if this performance is indicative of the stock's fair value. To address this question, we delve into a detailed valuation analysis of Darden Restaurants (DRI), guiding readers through an informed exploration of the stock's intrinsic worth.
Company Introduction
Darden Restaurants Inc (DRI, Financial), the largest restaurant operator in the U.S. full-service space, boasts a remarkable portfolio of 10 brands and a substantial market presence. With a current stock price of $167.17 and a GF Value of $176.46, the company sits on the threshold of its estimated fair value. This juxtaposition offers an ideal starting point for a deeper analysis of Darden Restaurants' intrinsic value, blending financial metrics with essential company insights.
Summarize GF Value
The GF Value is a unique metric that encapsulates the intrinsic value of a stock like Darden Restaurants Inc (DRI, Financial), considering historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line suggests the fair market value for the stock, and Darden Restaurants currently aligns closely with this benchmark. Therefore, the stock appears to be fairly valued, which implies that its long-term return may align with the company's business growth rate.
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Financial Strength
Before investing, assessing a company's financial strength is crucial to minimize the risk of permanent loss. Darden Restaurants' cash-to-debt ratio stands at 0.04, which is lower than the majority in the Restaurants industry. With a financial strength rating of 5 out of 10, the company's financial health is considered fair.
Profitability and Growth
Investing in profitable companies, especially those with a track record of consistent profitability, is generally less risky. Darden Restaurants has been profitable for 9 out of the past 10 years, with a solid operating margin of 11.21%, ranking better than 82.42% of its peers. This strong profitability is reflected in the company's 8 out of 10 profitability rank from GuruFocus.
Growth is a pivotal factor in a company's valuation. Darden Restaurants' 3-year average annual revenue growth rate of 10.3% surpasses 77.98% of its competitors, and its EBITDA growth rate of 83.8% outperforms 95.59% of the industry, signaling a strong potential for value creation for shareholders.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its profitability relative to its capital costs. Darden Restaurants' ROIC of 9.96 is greater than its WACC of 7.08, indicating effective value creation for its shareholders.
Conclusion
Ultimately, Darden Restaurants (DRI, Financial) is fairly valued, with a robust financial condition and strong profitability. Its growth ranking is commendable, placing it ahead of the majority within the Restaurants industry. For a more detailed financial overview, investors can review Darden Restaurants' 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
