5 Restaurant Stocks to Keep an Eye on in 2019

Which stocks are likely to rise and fall this year?

1. McDonald's

The reason that McDonald's is so high on this list is because it has been keeping up with market trends for several years now. Not only is McDonald's pushing for healthier choices in its menu, but it is also striving to improve its efficiency through the investment and implementation of new technologies. 

[1]"the valuation on MCD stock is reasonable and in line with its long-term average. As such, upward and outward is the most likely path forward for MCD stock in 2019."

2. Starbucks

This coffee powerhouse has been a strong performer, which is why it has such a high valuation. However, as trends shift, Starbucks is beginning to see cracks and chinks appearing in its previously-impenetrable armor. Smaller, indie shops are stealing customers that wish to follow a less-corporate trend while fast food restaurants are taking away customers that wish to spend less on coffee.

[2]"The net result will be slower-than-normal revenue and profit growth. The reason that's a problem for SBUX stock is that it isn't priced for slower-than-normal growth. Instead, SBUX stock has a bigger-than-normal valuation at around 26 forward earnings."

3. YUM + YUM China

While many may not have heard of YUM, everyone will be familiar with the companies it owns. These include KFC, Pizza Hut and Taco Bell. Taco Bell is seeing mass appeal thanks to its popularity with millennials. KFC is in a strong global position, especially since it has a prominent place in big Asian markets like China. Pizza hut, too, is beginning to turn around its fortunes and grow in popularity. Add to this, a new asset restructuring program, and YUM is poised to be a steady grower.

[3]"You will get steady and healthy comparable sales and bottom line growth. But, the valuation underlying YUM stock seems to already reflect that, with the forward P/E multiple at a multiyear high approaching 25 and the trailing dividend yield at a multiyear low of 1.8%."

4. Chipotle

This franchise has completely reinvented itself and has literally come back from the brink of going out of business. A combination of things has helped Chipotle achieve its staggering growth including new delivery options, additional menu items and bold marketing campaigns. With this level of unprecedented growth, things are looking up for Chipotle.

Despite its success, Chipotle will likely never reach the pinnacle of its prominence again, as it has missed the chance to hop aboard the health food craze. Because of this [4]"while growth will remain good going forward, it won't ever become good enough to warrant a nearly 50x forward multiple on CMG stock, meaning the next move in this stock will likely be lower."

5. Domino's

Domino's really changed the game with its revolutionary implementation of delivery via its new website. This custom approach upped customer engagement and ensured that Domino's had a true advantage over its other pizza-specialized competitors. However, with the proliferation of more and more delivery-based options becoming available, Domino's no longer has an unprecedented advantage in the industry. That being said, it is still benefitting from the woes of competitors like Papa John's.

[5]"Thus, in the big picture, growth remains good here - it will just slow going forward. Good but slower growth seems appropriately priced in here, at 29x forward earnings (in line with its long term average multiple)."