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Here's Why Investors May Find Darden (DRI) Appetizing Now
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Darden Restaurants, Inc. (DRI - Free Report) is currently one of the best-performing stocks in the U.S. restaurant space and has the potential to carry on the momentum in the near term as well. Therefore, if you haven’t taken advantage of the share price appreciation yet, it’s time you add this Zacks Rank #2 (Buy) stock to your portfolio.
Shares of Darden have outperformed its industry in the past year. The stock has rallied 34.2% compared with the industry’s collective growth of 6.4%.
Let’s have a look at a few factors in detail that make Darden a profitable investment at the moment.
Sales-Building Efforts to Drive Top Line
Darden’s enthralling growth potential lies in its strategies to build a robust top line. By focusing on technology-driven initiatives like the system-wide rollout of tablets, the company has been boosting sales for the past few quarters.
Apart from technological innovations, Darden implemented a set of initiatives under its Brand Renaissance Plan to boost the performance of the Olive Garden brand. These include simplifying kitchen systems, improving sales planning and scheduling, operational excellence to improve guest experience, developing core menu items, allowing customization, and making smarter promotional investments. The revamped restaurants are already generating high same-restaurant sales and returns. In fact, the remodeling program gained momentum in the last couple of quarters and the company intends to continue investing in remodeling for optimal returns. Supported by these initiatives, Olive Garden posted the 15th consecutive quarter of positive comps in fourth-quarter fiscal 2018.
Moreover, the Zacks Consensus Estimate for fiscal 2019 sales is pegged at $8.5 billion, reflecting an increase of 4.6% from 2018. Darden’s relentless efforts to drive sales should put the company on growth trajectory in the days ahead.
Cost Saving Efforts to Reap Benefit
Darden is focusing on an aggressive cost management plan, under which it is trying to significantly cut operating costs. For fiscal 2018, cost savings have resulted in synergies of about $10 million. Moreover, the company plans to reinvest any incremental savings into pricing and long-term growth drivers for the business, particularly emphasizing on enhancing its quality to drive market share gains.
We believe that such initiatives will immensely help the company to witness earnings growth. Arguably, earnings growth is of the utmost importance for determining a stock’s potential as surging profit levels often indicate solid prospects (and stock price gains). In fiscal 2019, Darden’s earnings per share are expected to grow 14.4%.
Valuation Looks Strong
Looking at Darden’s Price to Earnings Ratio (P/E) for the current fiscal, investors might be willing to pay premium as the company is slightly undervalued compared with its peers. The company’s P/E ratio for the trailing 12 months stands at 23.4 while that of the industry is 23.8.
Moreover, per the VGM Score that identifies the most attractive value, growth and momentum characteristics, Darden has a Score of B, indicating that the stock is most likely to outperform.
Attractive ROE
Darden delivered a ROE of more than 29% in the trailing 12 months compared with 7.6% recorded by its industry. This supports the company’s immense growth potential and indicates that it reinvests more efficiently compared with its peers.
Other Stocks to Consider
Other top-ranked stocks in the U.S. restaurant space include BJ’s Restaurants (BJRI - Free Report) , Good Times Restaurants (GTIM - Free Report) and Ruth's Hospitality . While BJ’s Restaurants flaunts a Zacks Rank #1 (Strong Buy), Good Times Restaurants and Ruth’s Hospitality carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ’s Restaurants, Good Times Restaurants and Ruth's Hospitality’s earnings for the current fiscal are expected to increase 50.4%, 33.3% and 26.4%, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Here's Why Investors May Find Darden (DRI) Appetizing Now
Darden Restaurants, Inc. (DRI - Free Report) is currently one of the best-performing stocks in the U.S. restaurant space and has the potential to carry on the momentum in the near term as well. Therefore, if you haven’t taken advantage of the share price appreciation yet, it’s time you add this Zacks Rank #2 (Buy) stock to your portfolio.
Shares of Darden have outperformed its industry in the past year. The stock has rallied 34.2% compared with the industry’s collective growth of 6.4%.
Let’s have a look at a few factors in detail that make Darden a profitable investment at the moment.
Sales-Building Efforts to Drive Top Line
Darden’s enthralling growth potential lies in its strategies to build a robust top line. By focusing on technology-driven initiatives like the system-wide rollout of tablets, the company has been boosting sales for the past few quarters.
Apart from technological innovations, Darden implemented a set of initiatives under its Brand Renaissance Plan to boost the performance of the Olive Garden brand. These include simplifying kitchen systems, improving sales planning and scheduling, operational excellence to improve guest experience, developing core menu items, allowing customization, and making smarter promotional investments. The revamped restaurants are already generating high same-restaurant sales and returns. In fact, the remodeling program gained momentum in the last couple of quarters and the company intends to continue investing in remodeling for optimal returns. Supported by these initiatives, Olive Garden posted the 15th consecutive quarter of positive comps in fourth-quarter fiscal 2018.
Moreover, the Zacks Consensus Estimate for fiscal 2019 sales is pegged at $8.5 billion, reflecting an increase of 4.6% from 2018. Darden’s relentless efforts to drive sales should put the company on growth trajectory in the days ahead.
Cost Saving Efforts to Reap Benefit
Darden is focusing on an aggressive cost management plan, under which it is trying to significantly cut operating costs. For fiscal 2018, cost savings have resulted in synergies of about $10 million. Moreover, the company plans to reinvest any incremental savings into pricing and long-term growth drivers for the business, particularly emphasizing on enhancing its quality to drive market share gains.
We believe that such initiatives will immensely help the company to witness earnings growth. Arguably, earnings growth is of the utmost importance for determining a stock’s potential as surging profit levels often indicate solid prospects (and stock price gains). In fiscal 2019, Darden’s earnings per share are expected to grow 14.4%.
Valuation Looks Strong
Looking at Darden’s Price to Earnings Ratio (P/E) for the current fiscal, investors might be willing to pay premium as the company is slightly undervalued compared with its peers. The company’s P/E ratio for the trailing 12 months stands at 23.4 while that of the industry is 23.8.
Moreover, per the VGM Score that identifies the most attractive value, growth and momentum characteristics, Darden has a Score of B, indicating that the stock is most likely to outperform.
Attractive ROE
Darden delivered a ROE of more than 29% in the trailing 12 months compared with 7.6% recorded by its industry. This supports the company’s immense growth potential and indicates that it reinvests more efficiently compared with its peers.
Other Stocks to Consider
Other top-ranked stocks in the U.S. restaurant space include BJ’s Restaurants (BJRI - Free Report) , Good Times Restaurants (GTIM - Free Report) and Ruth's Hospitality . While BJ’s Restaurants flaunts a Zacks Rank #1 (Strong Buy), Good Times Restaurants and Ruth’s Hospitality carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ’s Restaurants, Good Times Restaurants and Ruth's Hospitality’s earnings for the current fiscal are expected to increase 50.4%, 33.3% and 26.4%, respectively.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>