From fast food to fine dining, restaurants play a vital societal role. But the side dish is that they’re quite difficult to operate because high inventory and labor costs generally lead to thin margins at the store level. This leaves little room for error if demand dries up, and it seems like the market has some reservations as the industry has tumbled by 7.2% over the past six months. This performance was discouraging since the S&P 500 held its ground.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Keeping that in mind, here is one resilient restaurant stock pinned to our Google Maps and two we’re steering clear of.

Two Restaurant Stocks to Sell:

Domino's (DPZ)

Market Cap: $16.55 billion

Founded by two brothers in Michigan, Domino’s (NYSE: DPZ) is a globally recognized pizza chain known for its creative marketing and fast delivery.

Why Is DPZ Not Exciting?

1. Lackluster 5.2% annual revenue growth over the last six years indicates the company is losing ground to competitors
2. Projected sales growth of 5.8% for the next 12 months suggests sluggish demand
3. Static operating margin over the last year shows it couldn’t become more efficient

Domino's is trading at $483.09 per share, or 27.1x forward P/E. To fully understand why you should be careful with DPZ, check out our full research report (it’s free).

Portillo's (PTLO)

Market Cap: $804.2 million

Begun as a Chicago hot dog stand in 1963, Portillo’s (NASDAQ: PTLO) is a casual restaurant chain that serves Chicago-style hot dogs and beef sandwiches as well as fries and shakes.

Why Does PTLO Worry Us?

1. Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
2. Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.2% for the last two years
3. High net-debt-to-EBITDA ratio of 6× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Portillo’s stock price of $12.51 implies a valuation ratio of 34.4x forward P/E. Check out our free in-depth research report to learn more about why PTLO doesn’t pass our bar.

One Restaurant Stock to Watch:

Brinker International (EAT)

Market Cap: $6.71 billion

Founded by Norman Brinker in Dallas, Brinker International (NYSE: EAT) is a casual restaurant chain that operates the Chili’s, Maggiano’s Little Italy, and It’s Just Wings banners.

Why Are We Positive On EAT?

1. Same-store sales growth averaged 11.7% over the past two years, showing it’s bringing new and repeat diners into its restaurants
2. Operating profits increased over the last year as the company gained some leverage on its fixed costs and became more efficient
3. Free cash flow margin increased by 4.2 percentage points over the last year, giving the company more capital to invest or return to shareholders

At $151 per share, Brinker International trades at 16.3x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More

The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.

While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free.