Carrols Restaurant Group: High-Risk, High-Reward

Summary

  • Carrols Restaurant Group is one of the worst-performing restaurant stocks this year, down 53% vs. a 16% gain for the restaurant industry group.
  • This significant underperformance can be attributed to rising costs that have put a dent in margins, with wages up 13% year-over-year in Q3, and commodity inflation coming in at 9.2%.
  • At a share price of $2.90, much of this negativity looks priced in, with Carrols trading at one of its lowest revenue multiples in history, and close to 7x EV/EBITDA.
  • However, Carrols remains a high-risk, high-reward bet in a market with several low-risk, high-reward bets, making it a much riskier way to buy the dip in the recent sector-wide correction.

An empty Burger King restaurant inside the departure hall of Athens International Airport Eleftherios Venizelos. Burger King is an American multinational chain of hamburger fast food restaurants

IB_photo/iStock Editorial via Getty Images

It's been a decent year thus far for the restaurant industry group, with the average restaurant stock posting a double-digit return despite unprecedented headwinds. However, Carrols Restaurant Group (TAST) has significantly lagged its

This article was written by

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Taylor Dart is an individual investor with over 16 years of trading experience, with his primary focus being precious metals developers, producers and royalty/streaming companies.

Taylor leads the investing group Alluvial Gold Research, where he offers portfolios with entry/exit points, Buy/Sell alerts, and proprietary sentiment indicators for gold and silver miners. Learn more.

- Disclosure: I am not a financial advisor. All articles are my opinion - they are not suggestions to buy or sell any securities. Perform your own due diligence and consult a financial professional before trading or investing.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of QSR either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

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