Should Investors Buy Brinker International (EAT) Stock Near All-Time Highs?

As of early 2025, Brinker International, Inc. (EAT) stock has reached all-time highs, with a current price of $141.14. Investors may be wondering if it's still a good time to buy the stock, or if they should wait for a pullback. To make an informed decision, let's analyze the company's recent performance, valuation, and future prospects.

Recent Performance

Brinker International, a casual dining operator and franchisor, has seen strong performance in recent quarters. In the fourth quarter of fiscal 2023, the company reported:

* Net income per diluted share of $1.19, up 32.2% year-over-year
* Comparable restaurant sales growth of 6.6%, driven by menu pricing and favorable item mix
* Operating income margin of 5.5% and restaurant operating margin (non-GAAP) of 13.4%

The company's strong operational performance and earnings growth have contributed to its stock price appreciation.



Valuation

Brinker International's current P/E ratio is 34.59, which is higher than its historical average P/E ratio of around 20-25 and the industry average P/E ratio of 15-20. This indicates that the stock may be relatively expensive compared to its historical valuation and industry peers. However, the company's forward P/E ratio of 21.14 is lower than its current P/E ratio, suggesting that the market may be expecting significant earnings growth in the future.

Future Prospects

Analysts expect Brinker International's earnings to grow by 44.1% in the current year, which is significantly higher than the industry average of 1%. The company's strong earnings growth prospects are supported by its strategic focus on simplification, core business, and key investments in labor, repairs and maintenance, and advertising. These investments have driven a better guest and team member experience, stronger sales, and improving margins.

Risks and Challenges

While Brinker International has strong recent performance and future prospects, there are still risks and challenges to consider. The company operates in a competitive industry with high labor and food costs. Additionally, the company's high debt levels could limit its ability to make acquisitions in the short term. However, the company's strong cash flow generation and plans to reduce its debt-to-EBITDA ratio suggest that it can manage these risks effectively.

Conclusion

Investors should consider Brinker International's strong recent performance, attractive future prospects, and risks when deciding whether to buy the stock near all-time highs. While the stock may be relatively expensive compared to its historical valuation and industry peers, the company's strong earnings growth prospects and strategic focus on simplification and core business suggest that it is well-positioned for long-term success. Ultimately, investors should make their own decisions based on their risk tolerance and investment goals.