A Look At Darden Restaurants (DRI) Valuation After Raised Sales Guidance And Market Share Gains

Why Darden’s updated outlook caught investors’ attention

Darden Restaurants (DRI) lifted its full year sales guidance after reporting steady demand across its brands, especially Olive Garden, and pointing to market share gains versus both casual dining peers and limited service rivals.

See our latest analysis for Darden Restaurants.

The updated outlook comes on top of a recent run in the shares, with a 30 day share price return of 12.68% and a 1 year total shareholder return of 11.92%. This suggests momentum has been building on a longer 3 year total shareholder return of 45.83% and 5 year total shareholder return of 83.59%.

If this kind of steady compounding interests you, it could be worth looking beyond restaurants to see what else is working in the market, including fast growing stocks with high insider ownership.

With Darden shares around $200.25 and some estimates suggesting an intrinsic value and analyst targets above that level, the key question for you is whether there is still a buying opportunity at this price or whether the market is already fully reflecting expectations for future growth.

Most Popular Narrative: 9.3% Undervalued

The most followed narrative sees Darden’s fair value above the recent US$200.25 close, presenting a valuation case built around steady growth and margins.

The analysts have a consensus price target of $233.286 for Darden Restaurants based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $255.0, and the most bearish reporting a price target of just $157.0.

Read the complete narrative.

Curious what sits behind that fair value gap? Revenue compounding, margin uplift and a richer earnings multiple all play a part, plus one crucial discount rate assumption.

Result: Fair Value of $220.67 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that fair value gap could close quickly if beef costs bite harder into margins or if already soft guest counts further weaken revenue trends.

Find out about the key risks to this Darden Restaurants narrative.

Build Your Own Darden Restaurants Narrative

If you are not on board with this view or prefer to crunch the numbers yourself, you can build a custom thesis in minutes with Do it your way.

A great starting point for your Darden Restaurants research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If Darden has you thinking about what else could fit in your portfolio, do not stop here. Use data driven shortlists to keep your ideas pipeline full.

• Zero in on value by scanning these 876 undervalued stocks based on cash flows that might be pricing in more pessimism than their cash flows suggest.
• Tap into future facing tech by reviewing these 26 AI penny stocks that are building businesses around artificial intelligence.
• Target income potential by filtering for these 11 dividend stocks with yields > 3% that may suit a yield focused approach.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com