Darden Restaurants
DRI
$211.13
-3.51%
Darden Restaurants is the largest full-service dining operator globally, with over $12 billion in system sales across 2,159 company-owned restaurants in the US and Canada, operating well-known brands such as Olive Garden, LongHorn Steakhouse, and The Capital Grille. As a market leader in casual and fine dining, Darden's scale and diverse portfolio provide a competitive edge in the fragmented restaurant industry. The current investor narrative centers on the company's ability to sustain growth amid a challenging consumer environment, with recent quarterly results showing strong revenue growth and margin expansion, while the stock has rebounded sharply from its April lows, reflecting optimism about its value proposition and operational execution.…
DRI
Darden Restaurants
$211.13
Related headlines
Investment Opinion: Should I buy DRI Today?
Based on the analysis, Darden is rated a 'Hold' with a thesis that the stock is fairly valued with modest upside. The consensus rating is 'Buy' with an average target of $228.54, implying only 3.1% upside, which does not justify aggressive buying. The stock trades at a trailing P/E of 19.3x, a 12% discount to the industry average of 22x, but its PEG of 1.13 suggests fair value relative to growth. Revenue growth of 13.7% YoY and operating margin of 12.0% are strong, but the high debt and competitive pressures temper enthusiasm. This 'Hold' would upgrade to 'Buy' if the stock pulls back to below $200 (P/E <17.5x) or if revenue growth accelerates above 15%, and downgrade to 'Sell' if same-store sales turn negative or margins compress below 10%. Overall, the stock is fairly valued relative to its history and peers, with limited upside but solid fundamentals.
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DRI 12-Month Price Forecast
The AI assessment is neutral with medium confidence. Darden's strong revenue growth and margin expansion are positive, but the limited analyst upside and high leverage temper enthusiasm. The stock appears fairly valued, and the key factor will be whether growth can be sustained. If revenue growth accelerates above 15% or margins expand further, the stance would upgrade to bullish. Conversely, if same-store sales turn negative or debt levels increase, it would downgrade to bearish.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Darden Restaurants's 12-month outlook, with a consensus price target around $230.17 and implied upside of +9.0% versus the current price.
Average Target
$230.17
0 analysts
Implied Upside
+9.0%
vs. current price
Analyst Count
—
covering this stock
Price Range
$156 - $276
Analyst target range
Darden is covered by 24 analysts, with a consensus recommendation of 'Buy' and a mean recommendation score of 2.0 (where 1 is Strong Buy and 5 is Sell). The average target price is $228.54, implying a modest 3.1% upside from the current price of $221.60. The distribution shows a bullish tilt, with 8 Buy ratings, 4 Neutral, and 1 Underperform (based on recent actions), though the target upside is limited, suggesting analysts see the stock as fairly valued. The target range spans from $156.00 to $276.00, with the low target implying a 29.6% downside and the high target implying a 24.5% upside, reflecting significant uncertainty about the stock's future performance. Recent rating actions have been mixed, with Evercore ISI downgrading from Outperform to In Line, while others like Argus and UBS maintain Buy ratings, indicating a cautious optimism among analysts.
Bulls vs Bears: DRI Investment Factors
Darden presents a mixed picture: strong revenue growth and profitability are offset by high leverage and limited analyst upside. The bull case is supported by accelerating revenue, margin expansion, and a discount to peers, while the bear case highlights competitive threats and valuation concerns. Currently, the bull case has slightly stronger evidence given the robust operational performance, but the key tension is whether Darden can sustain double-digit growth in a competitive environment. If growth decelerates, the stock could face multiple compression, given its elevated P/B and EV/EBITDA.
Bullish
- Strong revenue growth: Q4 FY2026 revenue grew 13.7% YoY to $3.72B, with accelerating growth across quarters (Q1: $3.04B to Q4: $3.72B). This demonstrates robust market share gains in a mature industry.
- Margin expansion and profitability: Operating margin improved to 12.0% (Q4 FY2026) from 11.7% in Q4 FY2025, and net margin rose to 10.9% from 9.3%. ROE is exceptionally high at 54.7%, reflecting efficient capital use.
- Undervalued relative to peers: Trailing P/E of 19.3x is 12% below the industry average of 22x, despite superior scale and profitability. PEG ratio of 1.13 suggests fair valuation relative to growth.
- Strong free cash flow generation: TTM free cash flow is $1.12B, supporting a 3.0% dividend yield and a payout ratio of 57.4%. This provides a solid income component and financial flexibility.
Bearish
- Limited upside to analyst targets: Average target price of $228.54 is only 3.1% above the current price, indicating analysts see the stock as fairly valued. This limits near-term capital appreciation potential.
- High debt levels: Debt-to-equity ratio is 2.74, and current ratio is 0.31, indicating significant leverage and potential liquidity concerns. Interest expense of $50.4M in Q4 FY2026 pressures earnings.
- Underperformance vs. market: Over the past year, DRI gained 7.3% vs. S&P 500's 20.5%, underperforming by 13.2 percentage points. Relative strength over 1 year is -13.2%, showing persistent weakness.
- Competitive pressure from Chili's: Chili's (Brinker) is winning on value, with 8.6% same-store sales growth, intensifying competition in casual dining. This could pressure Darden's market share and margins.
DRI Technical Analysis
Darden's stock is in a clear recovery phase, having rebounded strongly from its 52-week low of $169.00. The current price of $221.60 is 31.1% above that low and sits at 96.4% of the 52-week high of $229.76, indicating the stock is near its highs and exhibiting strong momentum. Over the past year, the stock has gained 7.3%, but this underperforms the S&P 500's 20.5% return, highlighting relative weakness in the longer-term trend despite the recent surge. The stock's position near its 52-week high suggests bullish sentiment, though it may be overextended in the short term.
Beta
0.58
0.58x market volatility
Max Drawdown
-20.7%
Largest decline past year
52-Week Range
$169-$230
Price range past year
Annual Return
+2.4%
Cumulative gain past year
| Period | DRI Return | S&P 500 |
|---|---|---|
| 1m | +2.0% | +4.1% |
| 3m | +3.5% | +1.9% |
| 6m | -1.3% | +12.4% |
| 1y | +2.4% | +19.3% |
| ytd | +12.8% | +13.1% |
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DRI Fundamental Analysis
Darden's revenue trajectory is robust, with the most recent quarter (Q4 FY2026, ending May 31, 2026) reporting revenue of $3.72 billion, a 13.7% year-over-year increase. This growth is driven by strong performance across segments, particularly Olive Garden ($1.39 billion) and LongHorn Steakhouse ($854 million), which together account for 60% of total revenue. The multi-quarter trend shows accelerating growth, with revenue rising from $3.04 billion in Q1 to $3.72 billion in Q4, indicating a positive momentum. The company's ability to grow revenue at double-digit rates in a mature industry underscores its market share gains and effective value strategies.
Quarterly Revenue
$3.7B
2026-05
Revenue YoY Growth
+13.7%
YoY Comparison
Gross Margin
116.1%
Latest Quarter
Free Cash Flow
$1.1B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is DRI Overvalued?
Given Darden's positive net income, the trailing P/E ratio of 19.3x is the primary valuation metric, with a forward P/E of 17.9x, implying the market expects earnings growth. The gap between trailing and forward P/E suggests a modest growth expectation, with a PEG ratio of 1.13, indicating the stock is fairly valued relative to its growth rate. Compared to the industry average P/E of 22x (based on available data), Darden trades at a 12% discount, which is notable given its superior scale and profitability. Historically, Darden's P/E has ranged from 13.8x to 24.1x over the past five years, and the current 19.3x is near the middle, suggesting the stock is not overvalued relative to its own history, but also not at a bargain level.
PE
19.3x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 14x~24x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
12.4x
Enterprise Value Multiple
Investment Risk Disclosure
Financial risks are notable: Darden carries a high debt-to-equity ratio of 2.74, and its current ratio of 0.31 indicates potential liquidity stress. Interest expense of $50.4M in Q4 FY2026 adds to fixed costs, and the payout ratio of 57.4% leaves limited room for dividend increases if earnings falter. The company's reliance on continued revenue growth to justify its valuation is a key risk, as any slowdown could pressure margins and cash flow. Additionally, the high ROE of 54.7% is partly driven by leverage, amplifying downside risk if returns decline.