By Evie Liu
The restaurant industry is facing one of its toughest operating environments in years.
Traffic growth remains sluggish across much of the sector as consumers become selective about their spending. The expense of eating out far outpaced grocery price hikes in recent years, making the value gap hard to ignore. Meanwhile, higher labor and food expenses continue to pressure margins, leaving operators little room for error.
Investors have noticed. Many restaurant stocks have been marked down sharply as Wall Street grows less willing to pay premium valuations for companies with uncertain same-store sales growth and squeezed profits, even as they open new stores and enter new markets.
Yet periods of uncertainty often create opportunities. Some restaurant operators are still delivering healthy traffic growth or taking market share from weaker competitors. Others have credible turnaround plans or durable brand strength that investors may undervalue. Some have seen their shares punished so severely that expectations now appear low relative to their long-term prospects.
Now might be a good time for another look, as the stock market approaches a potential shift away from momentum trades. After a long run led by high-growth, high-valuation stocks -- especially names linked to technology and artificial intelligence -- investors question whether too much optimism is crowded into too few winners. The S&P 500 took a notable dive on June 5, led by some of the most expensive stocks.
That could open the door for a rotation toward those with steadier cash flows, reasonable valuations, recognizable brands, and clear paths to margin recovery. Restaurants aren't an obvious haven -- it's still a consumer-cyclical industry -- but some beaten-down names could benefit if investors look beyond the most chased-after trades.
Barron's picked six stocks that represent different ways to play a potential restaurant rebound.
Brinker International
Chili's has become one of the industry's most closely watched comeback stories. Yet its parent, Brinker International, still trades at a valuation that leaves room for investors to take another look.
Investors spent years treating Chili's like an aging casual-dining chain. But the brand has regained cultural relevance -- helped by simpler operations, sharper marketing, and menu items like Triple Dipper that brought back younger consumers.
Sales improved 22% in fiscal 2025, which ended last June, while earnings per share more than doubled. The stock rallied from late 2023 to early 2025, but has plateaued since because investors are worried about how long the momentum could last.
In the most recent quarter ended in March, Brinker's same-store sales rose 3.3% from a year ago, down from double-digit growth last year. January traffic was hurt by the winter storm Fern, the company said.
The growth appears underappreciated by the market. Brinker stock trades at 13 times forward earnings, far below the multiples for restaurant peers. Wall Street analysts expect 2026 earnings to grow 21%, with an average stock price target 23% higher than current levels.
Dutch Bros is another rare growth story. Same-store transaction volume has increased year over year for seven quarters in a row, while sales growth at most restaurant and beverage peers is either sluggish or driven by price hikes.
In the first quarter, Dutch Bros' net revenue rose more than 30% from a year ago, driven by 8.3% growth in same-shop sales and more than 150 new stores over the past four quarters. The results were stronger than Wall Street expected, and management raised its outlook for the full year.
Trading at 59 times forward earnings, the stock isn't cheap. That leaves little room for disappointment, but the valuation could stay elevated if the company keeps delivering.
Investors are paying up for what Dutch Bros might become: a national drive-through beverage chain with a loyal younger customer base and a long runway for new shops.
New beverages, expanded food options, mobile ordering, and a robust loyalty program could all help lift sales in the coming quarters. Management expects to have more than 7,000 stores nationwide in the long term.
Wall Street analysts expect earnings to grow 20% in 2026 and 33% in 2027, with an average price target of $77 for the stock -- about 33% above the current level.
Yum! Brands
Shares of Yum! Brands have been largely flat this year, even as the company delivered 15% revenue and adjusted earnings growth in the first quarter. Investors are underestimating the company's growth potential.
Taco Bell and KFC are well positioned as consumers across the globe seek affordable options amid economic pressures. Taco Bell posted 8% same-restaurant sales growth in the first quarter thanks to its menu innovation, digital engagement, and a strong value proposition. KFC, meanwhile, continues to expand in international markets, growing store units by 7%.
Pizza Hut is the company's weak spot, and Yum has been exploring a potential sale. While a divestiture could hurt earnings initially, it would allow management to focus on its faster-growing businesses, which could drive up Yum's stock valuation.
Morgan Stanley analyst Brian Harbour says Yum's investment in technology such as digital ordering and delivery optimization is undervalued by the market, noting that Yum could charge franchisees for software services and generate additional revenue.
Shares currently trade at about 22 times forward earnings, well below their recent five-year average and prepandemic levels. Wall Street analysts expect the firm to boost revenue and earnings by 12% in 2026 and see the stock reaching $175 in 12 months, up 15% from current levels.
Domino's Pizza
For investors wanting a quality name trading at a discount, Domino's Pizza might be a good option. Domino's has the bones of a great restaurant business: a franchised model, strong advertising, a powerful supply chain, and a brand built around value and convenience.
The concern is that growth appears to be losing momentum. In the first quarter of 2026, same-store sales rose less than 1% in the U.S. and slipped 0.4% in international markets -- a notable slowdown from 3% and 1.9% growth in 2025, respectively.
Domino's shares have declined 28% this year and now trade at 16 times forward earnings -- the lowest level since 2012 and cheaper than most restaurant names. That gives the stock some downside support, especially given the company's history of buybacks.
The chain is growing through global expansion: Domino's added nearly 800 stores globally in 2025 and plans to add nearly 1,000 in 2026. But the bull case and valuation recovery will likely rest on comparable sales in the coming quarters.
Wall Street expects total revenue to grow 5.6% for the year and earnings to increase 9%. Analysts polled by FactSet have a consensus target price of $407 for the stock, suggesting 28% upside.
Chipotle Mexican Grill
Chipotle Mexican Grill has fallen out of favor over the past year as concerns emerged about the company's ability to maintain its industry-leading growth. Total revenue rose 7.4% in the first quarter, but comparable sales increased just 0.5%. Margins also moved in the wrong direction, hurt by rising labor and beef costs.
Despite the recent slowdown, Chipotle remains one of the strongest brands in restaurants, catering to a younger, higher-income customer base seeking healthier, protein-heavy meals. It generates some of the highest average unit volumes in the industry and management is investing heavily in its menu, loyalty programs, and marketing to reignite traffic growth.
Unlike many mature restaurant chains, Chipotle still has a long runway for expansion. The company plans to open more than 300 restaurants this year, many with drive-through "Chipotlanes," which should help support its suburban expansion. International markets, largely untapped now, could become another meaningful growth driver over time.
While growth is unlikely to match the extraordinary pace of the past decade, expectations have already come down significantly. The stock has tumbled 45% over the past 12 months, now trading at 25 times forward earnings -- still a premium to many peers, but its lowest level since 2012.
If traffic trends stabilize and margins hold up better than feared, investors could reward Chipotle shares once again. Wall Street analysts expect earnings to stay under pressure in 2026, but rebound 19% in 2027. Consensus target price sits at $43, about 43% above current levels.
Shake Shack is a riskier bet: It could have the most upside if everything goes right, but it also has the most to prove.
The stock has lost 44% since May 6, after the company reported an operating loss for the first quarter. While much of the industry is dealing with elevated input costs, the burger chain is particularly vulnerable to the surge in beef prices stemming from record low cattle supply in the U.S.
The company also increased spending on marketing, technology, and staffing during the quarter. What's more, Shake Shack opened 17 company-operated restaurants in the quarter, which added higher pre-opening expenses.
The stock could bounce back if beef prices fall or if operational spending is dialed back. A successful margin recovery would likely bring investors back quickly, since the company's top-line growth remains healthy.
In the first quarter, Shake Shack's revenue rose 14% and same-restaurant sales increased 4.6%, with positive traffic. Those are encouraging signs at a time when many chains are struggling to get guests through the door.
Shake Shack recently cut its outlook for the second quarter of 2026, citing a challenging consumer environment and intensifying competition. Still, there are potential growth drivers, such as the company's limited-time Smoky BBQ menu and World Cup promotions.
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June 10, 2026 02:30 ET (06:30 GMT)
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