It’s seemingly all good news for Darden Restaurants, Inc. (NYSE:DRI) at the moment. DRI stock trades at an all-time high, and has gained nearly 15% so far this year and 22%+ since the beginning of 2017.

And there’s a lot to like. A blowout Q4 sent the stock soaring to an all-time high. As Larry Ramer wisely pointed out back in March, Darden is one of the bigger beneficiaries of tax reform and its lower corporate tax rates. And fiscal 2019 (ending May) guidance looks strong, with same-restaurant sales guided positive and earnings per share expected to rise 12-16% year over year.

But there are risks here, too, at the highs. A 20 multiple to the midpoint of FY19 EPS guidance is notably higher than Darden’s recent levels. FY19 EPS growth is benefiting from tax help. Margin pressure — notably from labor — is a concern. And I still believe there’s a secular headwind against corporate brands like Darden’s Olive Garden and LongHorn Steakhouse.

Admittedly, Darden has done an outstanding job executing a multi-year turnaround that began under activist pressure. At this point, however, I’m not sure how much upside realistically is left in DRI stock.

Growth Appears to Be Slowing

Certainly, Darden has earned its impressive returns of late (DRI stock has nearly tripled from 2014 lows). The sale of Red Lobster, the spin-off of Four Corners Property Trust Inc (NYSE:FCPT) and operational improvements all have created significant shareholder value.

But even in what looks like positive news coming out of Q4, there are signs that Darden’s growth is decelerating. In its Q4 earnings presentation, Darden cut its long-term margin expansion outlook from 10-40 basis points annually to 10-30 bps each year. That doesn’t sound like a lot — and it’s not — but it does signify a modest reduction in the long-term earnings outlook.

In the near-term, meanwhile, Darden is guiding for labor costs to rise 3.5%-4.5% in FY19. Same-restaurant sales growth is targeted at just 1-2%. Weakness at recently acquired Cheddar’s is a drag on the top line, but even with benign commodity costs, Darden is likely to see some margin pressure this year.

In fact, while EPS guidance looks strong (and was ahead of analysts’ consensus), the growth isn’t necessarily coming from operations. A lower tax rate is adding about 6 bps to growth — nearly half of the projected increase. That tailwind obviously will fade in fiscal 2020.

And if food costs — which have been tame for years now — start to rise, Darden’s margin issues could become a greater focus going forward. The operational improvements have been made, the real estate sold, and the portfolio reorganization is completed. Darden going forward will have to grind out margin expansion — and accelerated inflation would provide a significant headwind.

Are Chain Restaurants Dead?

Meanwhile, there’s still a question as to the long-term viability of chain restaurants. As I’ve written in regard to consumer products, millennials, in particular, are focusing on local and unique over corporate and distant. Some of Darden’s smaller chains like the high-end Yard House probably avoid that issue given their seemingly more local feel. But there’s little pretense when it comes to Olive Garden and LongHorn, which respectively drive about 50% and 20% of total revenue, respectively.

Indeed, the casual dining space elsewhere has seen a lot of pressure. Even with recent rallies, Chili’s owner Brinker International, Inc. (NYSE:EAT) and Applebee’s operator Dine Brands Global Inc (NYSE:DIN) have been dead money for four-plus years now.

Darden does appear to be best-in-class. It’s fought off the rise of “fast casual”. With Chipotle Mexican Grill, Inc. (NYSE:CMG) and Shake Shack Inc (NYSE:SHAK), among many others, seeing decelerating growth themselves, that threat isn’t what it used to be. Still, 1-2% same-restaurant sales growth in what is close to a booming economy isn’t all that impressive. And it leaves a lot of pressure on margins to cooperate for earnings to grow enough even to support the current multiple.

DRI Stock No Longer Looks Cheap

As a result, it’s simply tough to get too excited about DRI stock at these levels. A 20 forward multiple for 6-9% pre-tax income growth seems about right. Add to that the cyclical nature of the restaurant business — which means, in theory anyway, that Darden stock should receive a lower multiple near the end of the cycle — and valuation looks about right, if not a bit stretched.

That’s not to say — at all — that this is a bad business. Indeed, I’d much rather own DRI than EAT, whose recent rally looks like too much, too fast even after a recent pullback. But there are risks lurking for Darden, in terms of both margins, comps, and the economy as a whole. And at 20x, it’s tough to argue that those risks really are priced in.

As of this writing, Vince Martin has no positions in any securities mentioned.