We recently published a list of 10 High Growth Food Stocks to Buy. In this article, we are going to take a look at where Darden Restaurants, Inc. (NYSE:DRI) stands against other high growth food stocks to buy.
The global food industry has always stimulated economic growth, innovation, and a shift in consumer trends. It is projected to reach $2.2 trillion by 2032 from its market size of $1.64 trillion in 2022, at a compound annual growth rate (CAGR) of 2.99%, according to Market Research Future. Despite food being a necessity, the business dynamics within the food industry are very complex and companies must be adaptable as they navigate the complexities of rising production costs, changing consumer preferences, and global supply chain disruptions.
Within the industry, inflation remains a key topic. While it was soaring in 2022, food prices have since declined. However, they are on the rise again, causing financial strain on both consumers and businesses. As reported by the U.S. Department of Agriculture (USDA) in December 2024, grocery prices went up by 1.8% compared to the previous year, and food-away-from-home costs increased to 3.6%. Especially staple food items, including eggs and beef, had a sharp rise due to the avian flu wave and the supply limitations. These price fluctuations create a challenge for food companies, which must adjust their pricing strategies without sacrificing demand or alienating customers.
On the other hand, consumer behavior is also changing, putting forth factors like health, sustainability, and convenience. Thus, specialty stores have seen an increase in the demand for fresh and raw food. At the same time, budget-conscious shoppers are gravitating toward discount retailers, highlighting the growing importance of affordability. Thus, food companies must meet diverse consumer needs driven by the dual trend of seeking premium and value-oriented products.
Furthermore, technological breakthroughs are also contributing to the industry’s transformation. Supply chain optimization, waste reduction, and increased production efficiency are being greatly aided by automation and artificial intelligence (AI). Moreover, robotics is deployed in food processing to increase production and efficiency, while AI-driven demand forecasting helps avoid inventory problems. Consumers’ growing need for convenience is being met by the usage of digital ordering and delivery platforms, which opens new avenues for revenue growth. By adopting these technologies, companies are keen to improve operations and take advantage of growth opportunities in a market that is constantly evolving.
Even with economic instability, the future of the food industry is promising, driven by global population growth, urbanization, and the expanding middle class in emerging markets. In addition, new investment opportunities are being created by the popularity of plant-based meals and alternative proteins. Thus, big industry players are prioritizing the integration of technology, sustainability, and innovation in their business model to capitalize on future growth potential.
Many stocks stand out for their capacity to capitalize on this growth potential.
Methodology
To curate our list of the 10 High Growth Food Stocks to Buy, we used Finviz stock screener to gather stocks within the food sector with a strong market capitalization. We then narrowed the list based on each company’s five-year compound annual growth rate (CAGR) to identify those demonstrating consistent revenue expansion.
Furthermore, we also considered the number of hedge funds holding stakes in each stock, using data from Insider Monkey’s hedge fund database, which tracks the activity of 1,009 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A single diner enjoying an elegant meal in a sophisticated restaurant setting.
Darden Restaurants, Inc. (NYSE:DRI)
Number of Hedge Funds Holders: 27
5-year Revenue CAGR: 9.90%
Darden Restaurants, Inc. (NYSE:DRI) is a key player in the North American full-service restaurant industry. It manages iconic brands, such as Olive Garden, LongHorn Steakhouse, and Yard House.
Darden Restaurants, Inc. (NYSE:DRI) reported strong results in Q2 2025 ended November 24, 2024. The company reported sales of $2.9 billion, marking a 6% year-over-year increase. Same-restaurant sales increased by 2.4%, driven by strong performances from its flagship brands, including Olive Garden, LongHorn Steakhouse, and Yard House.
Furthermore, the company’s success is reflected in a 10% increase in adjusted diluted net earnings per share, which reached $2.03 per share, backed by an adjusted EBITDA of $445 million. Olive Garden maintained strong margins of 21.4%, whereas LongHorn Steakhouse outperformed with a 7.5% same-restaurant sales growth rate, surpassing industry averages.
Moreover, a considerable step for Darden Restaurants, Inc. (NYSE:DRI) was the acquisition of Chuy’s in October 2024, adding 103 restaurants to its holdings. Looking ahead, this acquisition is expected to generate $17 million in synergies, with $2 million projected to be realized in fiscal 2025 and the remainder in 2026. The company also announced an updated proprietary point-of-sale system, designed to streamline operations and improve data analytics, demonstrating its commitment to operational efficiency.
Despite difficulties, such as the hurricanes that affected particular regions, Darden’s back-to-basics approach, emphasizing food quality, service, and atmosphere, has proven effective in maintaining customer loyalty. Sales were boosted by promotions such as Olive Garden’s extended Never-Ending Pasta Bowl and LongHorn’s emphasis on steak quality. Yard House and Cheddar’s Scratch Kitchen also used unique menu offerings and strategic pricing to maintain a steady flow of customers.
Thus, Darden Restaurants, Inc. (NYSE:DRI)’s financial position remains strong with a disciplined approach to capital allocation. The company plans $650 million in capital expenditures, demonstrating its commitment to growth and expansion. Moreover, investor sentiment has been particularly strong, as shown by the stock price’s 25.12% increase over the last six months. Accordingly, 27 hedge funds held a stake in the company as of Q4 2024, indicating confidence in its long-term prospects.
Overall, DRI ranks 8th on our list of high growth food stocks to buy. While we acknowledge the potential of DRI as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DRI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.