Investment Thesis
Restaurant Brands demonstrates solid operational performance with 12.2% revenue growth and a strong 23.3% operating margin, generating robust free cash flow of $1.4B. However, negative earnings per share (-$0.20) deteriorating sharply despite revenue growth, combined with a highly leveraged balance sheet (2.57x Debt/Equity) and liquidity concerns (current ratio 0.98x), creates material financial risk that offsets operational strengths.
Strengths
- Robust revenue growth of 12.2% year-over-year demonstrating market demand
- Exceptional operating margin of 23.3% and strong ROE of 20.8% indicating efficient operations
- Strong free cash flow generation of $1.4B (15.4% FCF margin) providing financial flexibility
- Excellent interest coverage ratio of 22.0x demonstrating ability to service debt obligations
Risks
- Severe EPS deterioration of -130.8% YoY with negative diluted EPS of -$0.20 despite revenue growth signals earnings compression
- Critically high leverage with Debt/Equity ratio of 2.57x and $13.3B long-term debt creating financial stress
- Liquidity crisis risk with current ratio of 0.98x and quick ratio of 0.91x both below 1.0 threshold
- Net income essentially flat (-0.1%) while revenue grew 12.2% indicates margin compression and operational challenges
Key Metrics to Watch
- Earnings per share trend and path to profitability given negative diluted EPS
- Debt reduction progress and leverage ratios given Debt/Equity of 2.57x
- Gross margin recovery given concerning 8.8% level despite strong operating margins
- Free cash flow sustainability and cash position given liquidity constraints
Financial Metrics
Revenue
9.4B
Net Income
1.1B
EPS (Diluted)
$-0.20
Free Cash Flow
1.4B
Total Assets
25.6B
Cash
1.2B
Profitability Ratios
Gross Margin
8.8%
Operating Margin
23.3%
Net Margin
11.4%
ROE
20.8%
ROA
4.2%
FCF Margin
15.4%
Balance Sheet & Liquidity
Current Ratio
0.98x
Quick Ratio
0.91x
Debt/Equity
2.57x
Debt/Assets
79.9%
Interest Coverage
22.02x
Long-term Debt
13.3B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-04-15T03:48:23.076678 |
Data as of: 2025-12-31 |
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