Last decade’s winner
If you invested in Darden Restaurants, Inc. (NYSE:DRI) in 1995 when it was spun off from General Mills, Inc. (NYSE:GIS), you’ve done well, with a return of over 800% including dividends. Ff you’d invested as recently as 2000, you would have captured over 500% returns. And if you’d have been willing to make a bet that the economy would bounce back, and that Darden Restaurants, Inc. (NYSE:DRI) would make it through the recession unscathed, an investment in late 2009 would be up over 90% today, nearly double the strong recovery that the rest of the market has made.
But I think that bus left the station a long time ago. Both with its TTM and forward PE valuation ratio over 16, the market is valuing Darden on the higher end of history. To me that’s a sure sign, at least in a large, established company like Darden is today, that there isn’t a lot of room to make money. If the market decides to put it on sale, with a PE ratio closer to the low teens, income investors should consider taking a position, as the company pays a strong dividend of 3.8% based on recent share prices. But if it’s growth you’re after, this isn’t where you’ll find it.
Foolish bottom line
All four of these companies offer very different cuisine, experiences, and target customers looking for different things, for the most part, so besides all selling food and offering a place to eat it, they don’t really compete with each other in significant ways. Additionally, the slow, yet sustained, improvements in the domestic economy and employment picture should result in improved performance for all four companies, as more folks can afford to eat out.
And if you want an investment recommendation, I’ll stick to my guns: Take a bite of any of the three fast-growing people-feeders above if you’re hungry for growth, but wait on Darden if you’re after an income-paying Blue Plate Special. It needs to either show earnings growth, or Mister Market needs to catch up to the reality of limited growth opportunity. What do you think? Share in the comments below!
The article Is it Too Late, or Can Panera Still Make You Some Dough? originally appeared on Fool.com and is written by Jason Hall.
Jason Hall owns shares of Chipotle Mexican Grill. The Motley Fool recommends Buffalo Wild Wings, Chipotle Mexican Grill, and Panera Bread. The Motley Fool owns shares of Buffalo Wild Wings, Chipotle Mexican Grill, Darden Restaurants, and Panera Bread. Jason is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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