3 Restaurant Stocks to Buy on the Dip: June 2024

Core Viewpoint - The restaurant industry is facing challenges due to inflation and a slowing economy, but certain stocks near their 52-week lows present compelling investment opportunities as they are expected to recover in the coming months [1] Group 1: Portillo's (PTLO) - Portillo's is a small restaurant chain specializing in Chicago-style foods, with the stock down nearly 50% over the past year, presenting a value opportunity despite reasonable revenue growth [4] - The company is expanding aggressively into fast-growing states like Texas, Florida, and Arizona, which could transform it from a regional player to a nationwide brand [15] - Analysts have labeled Portillo's as a consensus strong buy in the restaurant sector [4] Group 2: Dine Brands (DIN) - Dine Brands operates several restaurant concepts, including Applebee's and IHOP, and has seen its stock fall 35% over the past year, with revenue expected to increase by about 1% this year [10] - The company operates primarily through a franchising model, which mitigates economic volatility as franchise operators bear the brunt of economic fluctuations [17] - Dine Brands is considered a deep value stock, trading at just 6 times forward earnings compared to peers like Brinker International, which trades at 18 times forward earnings despite similar revenue growth [18] Group 3: Yum China (YUMC) - Yum China operates KFC, Pizza Hut, and Taco Bell in China and has faced challenges due to the broader economic slump in the country, with its stock down by half from its 2023 peak [12] - The company reported record-high revenues of $11 billion in 2023, with expectations to reach $11.7 billion this year, and earnings per share are projected to grow by 9% this year [13] - Shares are trading at 15 times forward earnings, indicating potential for significant growth once the Chinese economy recovers [13]