
Commentary
The economy doesn’t look bad on paper as outlined below. The noticeable exception is GDP which shows anemic economic growth and of course, an elevated inflation level that requires more supply (or economic growth) to meet the current level of demand.

Fast food stocks performed well with a +4% median increase during March and a +5.5% increase during 1Q23. Notably, the financial performance of the QSR names remains robust with forecasts for strong top-line and EBITDA growth to go with a healthy 16x EV/EBITDA valuation.

Sit-down restaurant stocks did not perform as well in March as a weakening consumer is more likely to trade down from FSR to QSR. In any case, FSR stocks were up +19% YTD during 1Q23 while the financial prospect for this segment remains decent for now. Also, FSR stocks are supported by reasonable valuations.
