Darden Restaurants
DRI
$220.48
+1.81%
Darden Restaurants is the largest full-service dining operator in North America, running more than 2,200 company-owned restaurants across ten banners — Olive Garden (roughly 42% of sales), LongHorn Steakhouse (26%), a fine-dining portfolio including The Capital Grille, Ruth's Chris and Eddie V's (21%), and smaller concepts such as Yard House and Cheddar's — while also collecting royalties from 167 franchised units. Its scale, vertically integrated supply chain and multi-brand portfolio give it a structural cost and purchasing advantage over independent operators and smaller casual-dining chains, positioning it as the sector's defensive consolidator rather than a growth disruptor. The current investor debate centers on whether Darden can sustain positive same-store sales and traffic in a value-conscious consumer environment, with the recent rally tied to improving casual-dining traffic trends and the company's ability to pass through modest menu pricing while defending share against fast-casual and quick-service competitors. Sentiment has also been shaped by the integration of the Ruth's Chris acquisition into the fine-dining segment, elevated capital spending on new-unit growth, and a balance sheet carrying meaningfully more leverage than in prior cycles.…
DRI
Darden Restaurants
$220.48
Related headlines
DRI 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Darden Restaurants's 12-month outlook, with a consensus price target around $233.44 and implied upside of +5.9% versus the current price.
Average Target
$233.44
0 analysts
Implied Upside
+5.9%
vs. current price
Analyst Count
—
covering this stock
Price Range
$163 - $276
Analyst target range
Coverage is deep and constructive: 25 analysts follow Darden with a consensus recommendation of "buy" (mean rating 1.82 on a 1–5 scale where 1 is strong buy), and the average target price of $233.44 implies roughly +9.9% upside from the $212.40 current price. The consensus leans bullish but not aggressively so — the mean rating of 1.82 sits between strong buy and buy — and the recent institutional ratings flow is stable rather than directional, with Citigroup, Guggenheim, BTIG, Mizuho, Oppenheimer and Freedom Capital Markets all reiterating Buy/Outperform while Stephens, BMO and TD Cowen stay at Equal Weight/Market Perform/Hold. The absence of recent downgrades supports the view that the pullback from the August highs is consolidation, not a change in the fundamental story.
The target range of $163.00 to $276.00 is wide — a spread of $113, or roughly 53% of the current price — signaling meaningful dispersion in assumptions. The $276 high target implies roughly 30% upside and would require either multiple expansion toward the mid-20s PE or an acceleration in same-store sales and traffic beyond the current 5.1% revenue growth, likely tied to successful value messaging and fine-dining recovery. The $163 low target implies about 23% downside and prices in margin compression from wage inflation, a consumer slowdown that pressures casual-dining traffic, or deleveraging concerns given the 2.87x debt-to-equity. With estimated EPS tightly clustered at $14.30–$14.61 (a spread of just 2%), analysts broadly agree on near-term earnings — the disagreement is almost entirely about the multiple the market should pay, which is the classic setup for a stock that trades on sentiment and macro headlines rather than company-specific execution.
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Bulls vs Bears: DRI Investment Factors
The bull case currently holds the stronger evidence: a 1.82 consensus rating, $233.44 average target (+9.9%), a 19.3x PE below the 21–25x peer range, a 3.0% covered dividend, and a 0.618 beta that has contained drawdowns to -15.12%. The bear case rests on real but secondary concerns — 2.87x debt-to-equity, a 0.31 current ratio, and quarterly shareholder returns ($405M) exceeding quarterly FCF ($100.5M) — plus a margin that compressed to 9.98% from 13.16% a year ago. The single most important tension is whether same-store sales and traffic can stay positive in a value-conscious consumer environment: if traffic holds, the 17.1x forward multiple has room to expand toward the mid-20s and the $276 high target becomes reachable; if traffic turns negative, the leverage and thin liquidity turn a defensive compounder into a de-rating story toward the $163 low target.
Bullish
- Analyst consensus buy with 9.9% upside: 25 analysts carry a mean rating of 1.82 (between strong buy and buy) with an average target of $233.44 versus the $212.40 price, implying +9.9% upside. The high target of $276 implies roughly 30% upside, and no recent downgrades have appeared despite the pullback from the August peak.
- Valuation at a discount to peers: At 19.30x trailing and 17.13x forward earnings, Darden trades below the 21–25x range typical of large-cap casual-dining peers, with a PEG of 1.13 and EV/EBITDA of 13.6x. The 3.0% dividend yield with a 57.4% payout ratio provides a valuation floor that faster-growing but non-paying peers lack.
- Steady mid-single-digit revenue growth: Latest-quarter revenue of $3.20 billion grew 5.11% year-over-year, and the trailing four quarters total roughly $13.48 billion. Consensus forward revenue of $16.38 billion implies continued mid-single-digit expansion, with Olive Garden ($1.54B) and LongHorn ($1.02B) driving about 76% of the top line.
- Low beta with contained drawdowns: A beta of 0.618 makes Darden roughly 38% less volatile than the S&P 500, and its maximum drawdown over the period was only -15.12%. The stock is up 13.91% over one year and 13.46% YTD, slightly ahead of the S&P 500's 13.13% and 11.45%, with 3-month relative strength of +5.35.
Bearish
- Leverage and thin liquidity buffer: Debt-to-equity of 2.87x and a current ratio of just 0.31 mean the company relies on operating cash flow rather than liquidity reserves. Quarterly shareholder returns of $405 million exceeded the $100.5 million of FCF generated, funded partly from the balance sheet — a constraint if cash flow disappoints.
- Margin compression versus year-ago: The latest Q1 operating margin of 9.98% compares with 12.99% in Q4 and 13.16% in the year-ago Q3, and EPS of $2.05 fell from $2.21 a year earlier. Net margin of 7.29% in the quarter versus 10.89% in Q4 shows how quickly seasonal leverage reverses when costs rise.
- Momentum has stalled near resistance: The 1-month change is -0.60% versus a +13.91% one-year gain, and the stock fell 2.37% on the latest session from $217.56. It failed to hold above the $217–$218 zone, and the 6-month relative strength of -0.81 shows it has lagged the market since spring after summer leadership.
- Wide analyst dispersion signals uncertainty: The target range of $163 to $276 spans $113, or roughly 53% of the current price, even though EPS estimates are clustered within 2% ($14.30–$14.61). The disagreement is entirely about the multiple, meaning the stock trades on sentiment and macro headlines rather than company-specific execution.
DRI Technical Analysis
Darden is in a sustained, choppy uptrend: the stock is up 13.91% over the past year and 13.46% year-to-date, and at $212.40 it sits at roughly 71% of its 52-week range of $169.00–$229.76 — closer to the highs than the lows but not extended at the extreme. That positioning implies momentum remains intact without the overextension that typically precedes sharp mean reversion, particularly given the stock has already absorbed a 15.12% maximum drawdown during the period. The 52-week high of $229.76 is only about 8.2% above the current price, so the stock is within striking distance of new highs rather than recovering from a deep hole.
Short-term momentum has decelerated and diverged from the longer-term trend: the 1-month change is -0.60% versus a 1-year gain of 13.91%, and the stock fell 2.37% on the latest session from a $217.56 close. The 3-month change of +8.20% still outpaces the S&P 500's +2.85%, producing a relative strength of +5.35 over three months, but the 1-month relative strength of just +0.42 and the 6-month relative strength of -0.81 suggest the stock has been roughly market-perform since spring after leading in the summer. This pattern — strong 3-month, flat 1-month — is characteristic of a consolidation pause within an uptrend rather than a reversal, though the failure to hold above $217–$218 on the most recent push argues for caution. Volume of roughly 692,057 shares is modest and does not signal capitulation or distribution.
Key technical levels are well defined: support sits at the $193–$197 zone that has repeatedly arrested pullbacks (including the late-September slide to $193.25), with the 52-week low of $169.00 as the ultimate floor, while resistance is the $229.76 52-week high, with intermediate resistance near $227.68 (the August peak). A breakout above $229.76 on volume would confirm the uptrend and likely open a move toward the mid-$230s, whereas a breakdown below $193 would break the pattern of higher lows and target the $169 area. With a beta of just 0.618, Darden is roughly 38% less volatile than the S&P 500, meaning position sizing can be larger for the same risk budget and drawdowns should be shallower than the market's — consistent with the contained -15.12% max drawdown.
Beta
0.62
0.62x market volatility
Max Drawdown
-15.1%
Largest decline past year
52-Week Range
$169-$230
Price range past year
Annual Return
+20.9%
Cumulative gain past year
| Period | DRI Return | S&P 500 |
|---|---|---|
| 1m | +13.0% | +0.7% |
| 3m | +8.3% | +3.0% |
| 6m | +13.2% | +6.8% |
| 1y | +20.9% | +11.9% |
| ytd | +17.8% | +12.8% |
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DRI Fundamental Analysis
Revenue is growing at a steady mid-single-digit pace: the most recent quarter (ended 2026-08-30) delivered $3.20 billion, up 5.11% year-over-year from $3.04 billion, and the trailing four quarters total roughly $13.48 billion ($3.20B + $3.72B + $3.35B + $3.10B). The multi-quarter trend shows acceleration from the $3.10 billion Q2 print to $3.35 billion in Q3 and $3.72 billion in the seasonally strong Q4, with the latest Q1 of $3.20 billion representing normal seasonality rather than deceleration. Segment data shows Olive Garden at $1.54 billion and LongHorn at $1.02 billion as the twin growth engines, with fine dining at $371 million and other concepts at $793 million — meaning the core casual brands drive roughly 76% of the top line and the investment case remains a same-store-sales and traffic story rather than a unit-growth story. Consensus revenue of $16.38 billion for the forward year implies continued mid-single-digit expansion.
Profitability is solid and improving: the latest quarter produced $233.4 million of net income on a 7.29% net margin, with gross profit of $2.22 billion (69.2% gross margin) and operating income of $319.3 million (9.98% operating margin). The prior Q4 was materially stronger at $404.9 million net income and a 10.89% net margin, reflecting seasonal leverage, while the trailing-year net margin of 9.13% and operating margin of 12.16% sit comfortably within the range typical of large-cap full-service restaurant operators. Margin trajectory is mixed quarter-to-quarter — the Q1 operating margin of 9.98% compares with 12.99% in Q4 and 13.16% in the year-ago Q3 — but the year-over-year revenue growth of 5.11% alongside stable gross margins suggests pricing and cost control are offsetting wage inflation. EPS of $2.05 in the latest quarter versus $2.21 a year earlier reflects the timing of expenses and share count, not structural deterioration.
Balance sheet leverage is the key risk: debt-to-equity stands at 2.87x and the current ratio is a thin 0.31, meaning the company funds itself largely with debt and operating cash flow rather than liquidity buffers — typical for a restaurant operator but a constraint if cash flow disappoints. Free cash flow TTM is $1.06 billion, and the latest quarter generated $275.8 million of operating cash flow against $175.3 million of capex for $100.5 million of free cash flow, while the company returned $184.2 million in dividends and repurchased $220.8 million of stock — shareholder returns currently exceed quarterly FCF, funded partly by the balance sheet. ROE of 54.7% is exceptionally high but is inflated by the leveraged capital structure (equity multiplier above 5x), while ROA of 7.65% is the more honest measure of operating returns. The dividend yield of 3.00% with a payout ratio of 57.4% is well covered by earnings, but the FCF payout coverage is tighter and worth monitoring.
Quarterly Revenue
$3.2B
2026-08
Revenue YoY Growth
+5.1%
YoY Comparison
Gross Margin
69.2%
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?
Because Darden is solidly profitable (net income of $233.4 million in the latest quarter and positive trailing earnings), the PE ratio is the appropriate primary metric. The stock trades at 19.30x trailing earnings and 17.13x forward earnings, and the roughly 2.2-turn gap implies the market expects EPS growth of about 12.7% — consistent with consensus EPS of $14.46 versus trailing EPS near $11.00. A PEG ratio of 1.13 suggests the growth is being paid for at a broadly fair price rather than a premium.
Against the restaurant sector, Darden screens as a modest value: its 19.3x trailing PE and 17.1x forward PE compare favorably with the 21–25x range typical of large-cap casual-dining peers, and its 1.75x PS ratio and 2.42x EV/Sales are below the multiples commanded by faster-growing chains. The 13.6x EV/EBITDA is reasonable for a business with 12.2% operating margins and a 3.0% dividend yield, and the 10.45x price-to-book reflects the leveraged equity base rather than an earnings premium. The discount appears justified in part by slower growth (5.1% revenue growth) and higher leverage (2.87x D/E) than premium peers, but the 3.0% yield and 57.4% payout ratio provide a valuation floor that many competitors lack.
On its own history, Darden is in the middle-to-upper part of its range: the trailing PE of 19.3x compares with a historical band of roughly 14x–26x over the past several years, with the 14.3x low hit at the FY2026 Q4 print and the 26.1x high at the latest Q1 report. The current 19.3x is above the 17.7x–19.7x levels seen through much of FY2025 but well below the 23–26x peaks, implying the market is pricing in steady rather than heroic growth. The PS ratio of 1.75x is near the low end of its historical 5.9x–8.1x range on a reported basis, though that series is distorted by share-count and revenue-recognition differences; the cleaner read is that valuation is fair-to-slightly-cheap relative to Darden's own history, leaving room for multiple expansion if traffic accelerates.
PE
19.3x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 14x~26x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
13.6x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the balance sheet and cash-flow coverage. Debt-to-equity of 2.87x and a current ratio of 0.31 leave little liquidity cushion, and the latest quarter's $405 million of dividends and buybacks exceeded the $100.5 million of free cash flow generated, meaning returns are partly balance-sheet funded. Margins are also cyclical: the Q1 operating margin of 9.98% fell from 13.16% a year earlier, and EPS of $2.05 declined from $2.21, so a modest traffic shortfall would hit earnings disproportionately given the leveraged equity base (ROE of 54.7% versus ROA of just 7.65%). Revenue concentration adds to the risk, with Olive Garden (42% of sales) and LongHorn (26%) together driving roughly 68% of the top line.
Market and competitive risks are moderate given the low beta but real on the multiple. At 19.3x trailing and 17.1x forward earnings, Darden is cheaper than the 21–25x peer range, but that discount reflects slower 5.1% growth and higher leverage; if casual-dining traffic weakens, the multiple could compress toward the 14.3x low seen at the FY2026 Q4 print, which alone would imply roughly a 26% de-rating. Competition is intensifying — Chili's posted 8.6% same-store sales growth on value messaging, and fast-casual and quick-service chains are narrowing the price gap — while wage inflation pressures the 69.2% gross margin. A beta of 0.618 limits market-correlation risk, but the 6-month relative strength of -0.81 shows the stock already lagging the S&P 500 since spring, and the 5.13 short ratio indicates some positioning against a consumer slowdown.
In a worst-case scenario, a consumer recession drives negative casual-dining traffic, forcing discounting that compresses restaurant margins while wage costs stay sticky; simultaneously, the leveraged balance sheet limits buyback and dividend flexibility, and analysts cut targets toward the $163 low. From $212.40, that bear target represents roughly -23%, and a full retest of the 52-week low of $169.00 would mean about -20.4%. The stock's own maximum drawdown over the past year was -15.12%, so a -20% to -23% decline would exceed recent historical stress — a realistic but not base-case outcome given the 3.0% dividend yield and 0.618 beta that historically dampen downside.