Burger King's Turnaround and Undervalued QSR Present a Compelling Buy Opportunity

Restaurant Brands International (QSR), the parent company of Burger King, Tim Hortons, and Popeyes, has long been a stalwart in the quick-service restaurant (QSR) sector. Yet, recent data suggests the stock is undervalued relative to its growth potential, particularly as Burger King's strategic initiatives begin to bear fruit. With a robust turnaround plan in place and a valuation that lags behind peers, QSR presents a compelling buy opportunity ahead of its Q2 2025 earnings report on August 7.

Accelerating Momentum for Burger King

Burger King's Q1 2025 performance was lackluster, with U.S. comparable sales down 1.3% year-over-year, reflecting macroeconomic pressures and the impact of restaurant acquisitions from franchisees. However, management emphasized “encouraging momentum in Q2” and reaffirmed its 2025 goal of 8%+ organic Adjusted Operating Income (AOI) growth. This guidance hints at a rebound, driven by the $700 million “Reclaim the Flame” initiative, which includes remodeling, technology upgrades, and targeted advertising.

By Q1 2025, $143 million had already been allocated to the program, with the “Royal Reset” remodels and “Fuel the Flame” campaigns now in full swing. These efforts aim to modernize the brand's image, enhance customer experience, and drive franchisee profitability—a critical lever for sustained growth. International markets, excluding the U.S., have already shown stronger performance, with system-wide sales growing 9.6% in Q4 2024. This bodes well for Burger King's global expansion, particularly in high-growth regions like Asia and the Middle East.

Valuation: Undervalued Relative to Growth Prospects

QSR's valuation multiples suggest significant upside. As of July 2025:
- EV/Revenue (LTM): 4.1x, below the sector average of ~5.5x.
- EV/EBITDA (LTM): 12.6x, versus a peer median of ~15x.
- P/E Ratio: 13.4x, trailing behind rivals like Domino's Pizza (21x) and Starbucks (24x).

Even more compelling is the 2025E EV/EBITDA multiple of 19.0x, which factors in projected EBITDA growth. This suggests the stock is pricing in near-term headwinds (e.g., refranchising costs) but not yet reflecting the long-term benefits of “Reclaim the Flame.” Meanwhile, QSR's Rule of 40 (37%) and Rule of X (44%) metrics indicate a balance between growth and profitability, reinforcing its operational resilience.

Catalysts Ahead

The August 7 earnings report will be pivotal. Analysts anticipate Q2 U.S. comparable sales to rebound to +1%–2%, aligning with the “Reclaim the Flame” rollout. Additionally, the exclusion of Burger King China (now classified as held for sale) could reduce noise in financial results, highlighting core brand performance.

Longer term, QSR's targets—3%+ annual comparable sales growth and 5%+ net restaurant growth by 2028—are achievable given its global footprint of 32,000+ restaurants. The refranchising strategy, which reduces operational risk and boosts margins, further supports these goals.

Risks to Consider

• Currency Fluctuations: Weaker foreign exchange rates, particularly in Canada and Brazil, could pressure margins.
• Competition: Burger King faces intense rivalry from McDonald's and domestic players in emerging markets.
• Execution Risks: The “Reclaim the Flame” program's success hinges on timely execution and franchisee buy-in.

Investment Thesis

QSR's valuation is undervalued relative to its growth trajectory and turnaround potential. With 8%+ AOI growth on the horizon and a catalyst-rich Q2 report, the stock offers asymmetric upside. At a fair value estimate of $33.72 (vs. current price of $68.43), the math is skewed toward optimism—if Q2 results meet or exceed expectations.

Conclusion

Restaurant Brands International is a buy for investors seeking exposure to a QSR giant poised for a resurgence. While near-term challenges remain, the strategic investments in Burger King's rebranding, paired with undemanding valuations, make QSR a standout opportunity in a sector ripe for consolidation. Keep an eye on the August earnings report—this could be the spark to ignite a multiyear growth story.

Investment Rating: Buy
Price Target: $85+ by end of 2025, assuming 15x EV/EBITDA multiple and EBITDA growth.