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Public restaurant companies: A review of Yum! Brands (YUM), Brinker International (EAT), West Coast Ventures Group (WCVC)

What makes for a great business, especially if you’re in the food and hospitality sector? What are the keys to success in the restaurant industry?



The restaurant industry continues to grow, with investors looking to tap into every opportunity opened by a growing market. In fact, according to the National Restaurant Association, sales are expected to reach a whopping $863 billion this year, as the economy and even consumer support remain positive all throughout 2019. Despite the rising costs of labor and the introduction of more complex legislation, optimism remains high and the business environment is still competitive.

A number of brands are notably seeking the best of opportunities in the industry. We take a look at some of the key players.

A taste for success

Yum! Brands (YUM) received popularity through 2015 with a good number of hedge funds making a run for the company’s stocks.

At the end of the fourth quarter, the number of hedge funds in Yum! Brands (YUM) was 34, up 14 percent from the previous quarter. DE Shaw dominated the stakeholding with $267.2 million, followed by Two Sigma Advisors with a stake of $235.4 million.

Among the bullish hedge funds were Melvin Capital Management with an investment of $55.2 million and Renaissance Technologies with $29.8 million. In recent rankings, Yum! is not amongst the top 30, hence it was a great disappointment for hedge funds when the company underperformed. Despite this, the stock returned a modest 10.3 percent.

However, the number of long hedge funds went up by four recently, a sign that confidence surrounding Yum! is growing.

The restaurant industry is a growing market and investors are looking to tap into the market. (Photo by Volodymyr Goinyk via Shutterstock)

Betting on Brinker’s strength

Comprising one of the stronger stocks, Brinker International (EAT) is considered a grade ‘A’. It is on the investors’ watchlist, and ranks second in the Buy category. Currently, the stock is trading at a price-to-earnings (P/E) ratio of 11.23, compared to the general industry’s average of 23.69.

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Notably, EAT has a PEG ratio of 1.27. The industry’s average, in comparison, stands at 2.01. PEG is used by investors to evaluate the stock’s future prospects. The median PEG for EAT has been 1.26 in the last 12 months.

Meanwhile, Brinker’s price-to-sales (P/S) ratio is at 0.59, compared to the industry’s average P/S ratio of 1. From a cash flow perspective, EAT has a P/CF ratio of 5.79. The industry has a P/CF of 17.33. From these statistics alone, it can be said that Brinker has strong earnings, but it remains undervalued. It stands out as an impressive value stock.

Brinker International, which owns Chili’s remains an attractive value stock. (Photo by James R. Martin via Shutterstock)

West Coast Ventures and its game-changing strategy

West Coast Ventures Group Corp. (WCVC) has been a game-changer in the food industry and is about to make another great step, this time towards the cannabidiol (CBD) sector. The company’s Illegal Burger restaurant in Colorado will launch a new menu of CBD-infused items on 4/20, or April 20th—the world’s recognised special day of celebration of cannabis.

Its valuable partnerships have continued to prove profitable. Through its two brands, Illegal Burger and El Senor Sol, WCVC has pioneered the selling of CBD-infused drink, EVERx CBD Sports Waters. The deal was made in partnership with Puration Inc. (PURA). It should be noted that the CBD-infused drink was launched in 2017, and got PURA about 600 percent in sales within a year.

WCVC has more plans to introduce CBD-inspired items in their restaurant menu, which makes the company a good investment if you’re looking at expanding your cannabis stock portfolio. WCVC entered into an agreement last year with North American Cannabis Holdings (USMJ). WCVC is responsible for managing the establishments in Denver of the AmeriCanna Cafe.

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The restaurant business indeed holds a lot of potential. For forward-looking investors, going for the booming sectors such as CBD might be a sure bet.

(Featured image by via Shutterstock)

DISCLAIMER: This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

Kuria Irungu is a freelance journalist with an interest in research and writing from a free thought perspective. He reads and writes on different topics but has a particular interest in Diplomacy, Business, Entrepreneurship, Forex, and Financial Investments. He believes in the power of the pen. 'Writers never die they are survived by their writings.'

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