Darden Restaurants (DRI:NYS) Fundamental Valuation Report


Fundamental Valuation Report

Darden Restaurants(DRI:NYS)

Consumer Cyclical:Restaurants

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$103.94 (USD) 07/01/2019

Weighted Valuation
$115.00 (USD)

Overall Rating
Undervalued by 10.6%

Valuation Models Analyst Consensus: $131.33 (USD)
(in order of importance) Comparables: $107.30 (USD)
Adjusted Book Value: $81.38 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Fairly valued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation

Company Overview (DRI:NYS USD)

Price 103.94
Range 101.63 – 104.89
52 week 84.07 – 119.38
Open 101.74
Vol / Avg. 1.85M/1.98M
Mkt cap 12.84B
P/E 20.97
Div/yield 2.52/0.03
EPS 4.73
Shares 123.51M
Beta 0.33

Company Description

Darden is one of the largest players in the $185 billion U.S. casual dining industry. Olive Garden (858 units), LongHorn (506), and Cheddar’s Scratch Kitchen (157 company-owned and 14 franchise units) are its core brands, while the smaller, faster-growing specialty restaurant group is made up of Yard House (73), Capital Grille (58), Seasons 52 (42), Bahama Breeze (40), and Eddie V’s (19). In November 2015, the company spun off selected real estate and restaurant assets into Four Corners Property Trust.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for DRI:NYS

Using a discounted cash flow model we generated an intrinsic value of $187.83 (USD) for DRI:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

DRI:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $187.83 1% 5% 1% 5%
WACC (or Ke) 7.56 $236.63 $155.40
Terminal Growth Rate 2.60 $158.11 $232.53
Tax Rate 0.00 $197.77 $178.24
Cash Flow 1,461,769,919 $176.93 $198.73
Capital Expenditures -243,900,000 $186.23 $189.42
Long Term Debt 440,200,000 $188.01 $187.65

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $107.30 (USD) for DRI:NYS. We also generated a valuation of $140.70 (USD) using other metrics and comparables.
The comparable companies were Chipotle Mexican Grill (CMG:NYS), Texas Roadhouse (TXRH:NAS), Wendy’s (WEN:NAS), Yum Brands (YUM:NYS) and Yum China Holdings (YUMC:NYS).

Company DRI:NYS End Date Value
Earnings/Share $5.36 (USD)
Book Value/Share $18.42 (USD)
Sales/Share $65.32 (USD)
Cash Flow/Share $8.19 (USD)
EBITDA/Share $8.60 (USD)
Price Based on Comps Adjustment Factor (%)
$152.33 (USD) -27.8
$100.67 (USD) -49.9
$183.37 (USD) -62.1
$134.11 (USD) 44.3
$123.05 (USD) -11.4
DRI:NYS Ratios Used Average Values CMG:NYS TXRH:NAS WEN:NAS YUM:NYS YUMC:NYS
19.28 PE Ratio 28.42 64.25 27.39 6.45 18.80 25.21
5.42 PB Ratio 5.46 8.36 4.61 4.63 0.00 4.26
1.53 PS Ratio 2.81 2.55 1.79 2.57 5.40 1.73
12.20 PCF Ratio 17.28 20.85 13.25 12.02 27.83 12.47
11.91 EV to EBITDA 14.31 21.41 14.06 6.87 20.23 8.99

Multiples

Using a multiples approach we generated a valuation of  $104.30 (USD) for DRI:NYS

Company DRI:NYS End Date Value
Earnings/Share $5.36 (USD)
Book Value/Share $18.42 (USD)
Sales/Share $65.32 (USD)
Cash Flow/Share $8.19 (USD)
EBITDA/Share $8.60 (USD)
Price Based on Comps Adjustment Factor
$132.37 (USD) 0
$84.22 (USD) 0
$88.34 (USD) 0
$114.50 (USD) 0
$102.06 (USD) 0
Ratios Ratio Average
PE Ratio 24.70
PB Ratio 4.57
PS Ratio 1.35
PCF Ratio 13.99
EV to EBITDA 11.87

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  DRI:NYS for the last 10 years was  4.47

We ran the Adjusted Book Value for  DRI:NYS and generated a book value of  $18.22 (USD)
By multiplying these we get an adjusted valuation of  $81.38 (USD)

Analyst Data

In the Stockcalc database there are 3 analysts that provide a valuation for DRI:NYS. The 3 analysts have a concensus valuation for DRI:NYS for 2019 of $131.33 (USD).

DRI:NYS Darden Restaurants

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
4 2 0 4.3333 Outperform 2019-1-4

Current Price: 103.94 USD

Analyst Consensus
USD Millions 2019 2020
Mean EPS 5.67 6.34
# EPS Analysts 5 5
Mean Revenue 8,491.80 9,075.50
# Revenue Analysts 3 3
Mean Target Price 131.33
Mean Cash Flow 7.46 9.99
Mean EBITDA 1,175.50 1,291.70
Mean Net Income 712.00 792.10
Mean Debt Outstanding
Mean Tax Rate 10.60 11.20
Mean Growth Rate 10.15
Mean Capital Expenditure 439.70 429.20

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

Notice to User


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