Q: Hello, What are you thoughts on MTY? Between QSR and MTY, which one would you prefer. Thanks.
Regards,
Shyam
Regards,
Shyam
5i Research Answer:
MTY’s capital allocation prioritizes growth through acquisition by acquiring small franchisors, MTY is trading at 18x Forward P/E, MTY’s balance sheet is quite leveraged, net debt/EBITDA is around 5.8x
On the other hand, QSR is trading at around 24x Forward P/E, QSR mainly pays out the majority of its earnings through dividends and only occasionally does acquisitions by leveraging up the balance sheet, net debt/EBITDA is around 6.0x. Growth has accelerated in recent quarters.
We like both names and think the decision comes down more to risk appetite. QSR owns strong, steady brands and is a larger, more stable type of dividend payer. MTY takes more of a growth focus and has higher growth potential but is also far more volatile.