The 3 Most Undervalued Restaurant Stocks to Buy in June 2024


  • Fast food hasn’t exactly been on the fast track to fast gains. As the following restaurant firms pursue growth in the second half, shares look way too cheap going into June.
  • McDonald’s (MCD): It needs more than a month-long $5 value menu promo to win the love of its loyal customers, many of whom no longer see the fast-food chain as a cheap place to eat.
  • Domino’s Pizza (DPZ): It’s not just the pizza that’s hot; the stock has also been scorching in recent quarters.
  • Shake Shack (SHAK): The upscale “fast casual” restaurant has been gaining on the back of the quality factor.
undervalued restaurant stocks - The 3 Most Undervalued Restaurant Stocks to Buy in June 2024

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The quick-serve restaurant scene has been rocked of late, thanks in part to price increases that probably came in too quick, too fast. Undoubtedly, inflation has been the scapegoat for many firms to pin their excessive price increases on. If prices aren’t taking off, then it’s shrinkflation that’s caused many to get far less for their dollar. The fast-food firms haven’t shrunk down their meals markedly. However, they have seemingly been jacking up prices as though it’s going out of style. This led us to create this list of undervalued restaurant stocks.

With the Fed’s favorite inflation gauge (core PCE) coming in quite tame, up just 0.2% for April, inflation is, indeed, on its way to going out of style. And the fast-food industry could be one of the first to roll back on prior price increases.

Whether such price reductions are temporary, as will be the case with McDonald’s (NYSE:MCD) and its new $5 meal that’s going away after a month, remains the big question. In this piece, we’ll check out three undervalued restaurant stocks that I think have the means to make a comeback as value menus (rather than price hikes) become the name of the game.

McDonald’s (MCD)

New McDonalds Being Built in 2020, Close Up of Main McD Sign
Source: Retail Photographer /

No list of cheap fast-food stocks would be complete without the Golden Arches. McDonald’s has been at the center of attention when it comes to absurd price increases. These have popped up amid these latter rounds of the inflation boxing match. Indeed, McDonald’s food has gotten noticeably pricier lately. The big problem here is that far too many people have taken notice.

Could it be that the Big Mac index has gone too far? This index is an informal inflation gauge that tracks prices of the iconic burger over time or across different markets. That’s a definite possibility. It’s up to management to convince the customers that it’s still an affordable place to eat.

Many customers are upset that the recently announced $5 menu deal will end in July. Others view the meal as not giving enough bang for one’s buck. The meal, which includes one McChicken or McDouble, four chicken nuggets, small fries, and a small drink, sounds good on paper, though. Still, I’m unsure if the limited-time promotion will be a net positive for MCD stock come late summer.

Customers don’t just want limited deals; they want something more permanent. Either way, I’m confident management can hit the right spot as it gives customers value without causing franchisees to fret over potential losses from deals that eat into margins. At 22.3 times trailing price-to-earnings (P/E), MCD stock looks like the best deal of all.

Domino’s Pizza (DPZ)

A tall Domino's Pizza (DPZ) sign stands in Eau Claire, Wisconsin.
Source: Ken Wolter /

Unlike McDonald’s stock, which is down and out, Domino’s Pizza (NYSE:DPZ) is firing on all cylinders with its glorious comeback. With DPZ stock now up over 75% from its lows of February 2023, Domino’s shows us all that it is possible to gain in a world hit by inflation.

In the first quarter, Domino’s delivered more pizzas and did so faster on a year-over-year basis. Points-based loyalty programs, limited promos, and teaming up with Uber (NASDAQ:UBER) Eats are part of the reasons for solid recent results.

However, the high perception of value is likely why Domino’s is zigging while many of its peers are lagging. The pizza still tastes great and hot, thanks to blistering delivery speeds. And the price hikes just don’t seem to have been as noticeable. At least not to the extent of some of the meals that McDonald’s has been serving up.

Domino’s comeback amid inflation has been impressive and should serve as an example for firms seeking to gain similar traction. With newfound momentum and a modest 33.0 times forward P/E, DPZ stock is shaping up to be a delicious buy for summer. This is easily one of the most undervalued restaurant stocks.

Shake Shack (SHAK)

The Shake Shack (SHAK) on 125th Street in Harlem, New York City, USA
Source: Here Now /

Shake Shack (NYSE:SHAK) is a fast-food chain that aims to differentiate itself as more premium than its rivals. Undoubtedly, Shake Shack food is made to order in a fancier restaurant with modernized décor. Additionally, the firm insists it’s using high-quality ingredients to better cater to consumer wants. However, there’s only one problem with Shake Shack’s premium “fast casual” experience: the higher costs associated, especially amid inflation.

Either way, it seems like consumers have been more than willing to pay a bit more to get higher-quality food. Over the past year, SHAK stock has surged over 33% on the back of steady sales growth, and the run may not be over as Shake Shack looks to enhance margins without compromising on quality. Once inflation dies down and consumers have more cash to splurge on a fancier burger and fries, the setup could look really good for Shake Shack.

The secret sauce in fast-food stock gains really has been a laser focus on quality rather than minimizing prices. As a perfect fast-casual chain to profit from the middle-class consumer, I’d not sleep on the stock as it corrects off its 52-week high just shy of $110 per share. If you are looking for undervalued restaurant stocks, start here.

On the date of publication, Joey Frenette held shares of McDonald’s. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.

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