DRI
Darden Restaurants, Inc.$203.18
Sell
Target $157.29
Report: Mar 10, 2026Consumer Cyclical • Restaurants • Asset-Based OperatorSnapshot
Decision-first overview with recommendation, valuation anchor, and current setup.
Company Overview
Research Snapshot
Price History
Pelican View
Current$203.18-22.6%
Rec: SellConviction: High
Entry Target
N/A
N/A
Fair Value
$157.29
(23% below current)
Stop Loss
N/A
N/A
Position Size
None
Time Horizon
N/A
Key Metrics
Live Snapshot
Market Data
52 Week High$228.27
52 Week Low$169.00
Avg. 3 Month Volume1.54M
Efficiency
LTM Gross Margin21.6%
LTM EBITDA Margin15.6%
LTM EBIT Margin11.3%
LTM Operating Margin11.4%
LTM ROA8.6%
LTM ROE50.7%
LTM ROIC10.9%
LTM ROCE14.0%
Capital Structure
Market Cap (MM)$22.5B
Enterprise Value (MM)$28.4B
Shares Outstanding115.00M
Total Debt (MM)$6.19B
Cash & Equivalents (MM)$240.40M
LTM Net Debt (MM)$5.94B
LTM Net Debt/EBITDA3.0x
Growth
TTM Rev. Growth8.5%
Last 3-Yr Rev. CAGR7.3%
Last 3-Yr EBITDA CAGR8.8%
Last 3-Yr EPS CAGR7.3%
Valuation
Street Target Price$225.33
LTM EV/Revenue2.2x
LTM EV/Gross Profit10.3x
LTM EV/EBIT19.7x
LTM EV/EBITDA14.2x
LTM P/E20.3x
LTM EV/FCF26.9x
LTM P/FCF21.2x
LTM P/TB2.3x
LTM P/B10.7x
Dividend Yield3.0%
Payout Ratio62.0%
Executive SummarySituation: Current price is $203.18 versus fair value $157.29 (-22.6% expected return), and valuation confidence is stable. Debate: Bull case depends on Margin Compression in Q3 and Q4 FY2026: As the 130 basis point pricing-to-inflation gap persists, we expect operating margins to fall below the 11.3% reported in Q2, triggering a re-rating of the stock. Bear case centers on Commodity Inflation: Beef costs are the primary driver of the 30.3% food and beverage cost of sales. Conclusion: Recommendation is Sell with no position, pending a materially better risk/reward setup.
Bull Case
Darden's massive scale in procurement creates a cost moat that allows it to underprice independent competitors; strong cash conversion at 162% of net income supports a 3.1% dividend yield.
Bear Case
Persistent beef inflation at 5.5% and labor cost spikes are structurally eroding margins; negative tangible book value of -$5.91 per share provides no downside protection for equity holders.
Key Catalysts
Near-Term (0-6 months)Impact: High
Margin Compression in Q3 and Q4 FY2026: As the 130 basis point pricing-to-inflation gap persists, we expect operating margins to fall below...
Mid-Term (6-18 months)Impact: Critical
Traffic Deceleration: A potential pullback in consumer spending, particularly in the <$50k income bracket, could drive same-restaurant sales...
Long-Term (18+ months)Impact: Moderate
Darden is relevant for analysis now because it is trading near all-time highs despite a fundamental mismatch between its cost structure and...
Primary Risks
Concern: High
Commodity Inflation: Beef costs are the primary driver of the 30.3% food and beverage cost of sales. If beef prices do not ease as managemen...
Concern: Medium
Leverage and Covenant Risk: With $6.4B in debt and a 257% debt-to-equity ratio, Darden has limited room for error. A breach of the 3.5x leve...
Concern: Medium
Stewardship is rated as Weak due to a complete lack of insider alignment. Insiders have sold $33.5M in stock over the last 12 months with ze...
Recent Activity
2025-09-18SEC Filing (8-K)
-7.69%Darden Restaurants reports Q1 FY2026 results with 10.4% sales growth and declares $1.50 quarterly dividend
2025-03-20SEC Filing (8-K)
+5.77%Darden reported Q3 FY2025 results with 6.2% sales growth and updated fiscal outlook.
2024-12-19SEC Filing (8-K)
+14.74%Darden reported Q2 FY2025 results with 6.0% sales growth and updated fiscal outlook.
2024-09-19SEC Filing (8-K)
+8.25%Darden entered a $1.25 billion amended credit agreement and a $600 million term loan to finance Chuy's acquisition.
2024-03-21SEC Filing (8-K)
-6.50%Darden reported Q3 FY2024 results with 6.8% sales growth and authorized new share repurchase program.
Valuation Table
9.8/10Decision Grade
Scenario Range
$0
Bear
$168
Base
$206
Bull
$203