DARDEN RESTAURANTS, INC. (DRI): what the price requires

At today's price, DARDEN RESTAURANTS, INC. (DRI) is priced for +0.7% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/DRI

Headline

FieldValue
TickerDRI
CompanyDARDEN RESTAURANTS, INC.
Current price$196.70/sh
CompositionOlive Garden 43% / LongHorn Steakhouse 25% / Fine Dining 11% / Other Business 21%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed3.4%
Operating margin today11.7%
Margin compression implied-8.3pp
Implied growth0.7%
Multiple paid20x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~8.2pp (computed at the 7% minimum rate; the CAPM rate 6.9% sits below it).

Reconcile: at the x-ray's 9.3% required return this reads ~17.2%/yr; the models below use their own rates.

How unusual the bet is: within-range

ReferenceValue
vs own history-0.61σ
cohort percentile (of 210 peers)58
implied end-window share0%

Valuation X-Ray

The price is justified by relative-multiple; asset-based/earnings-power land below the price.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.54x4expensive
Earnings1.93x3expensive
Relative0.76x5justifies
Growth1.33x2expensive

Families that justify the price: Relative Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.2%); the inversion above states its own rate.

Per-Model Detail (n=14)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$0.00—noNegative/zero FCF — equity value floored at $0
DCF Exit MultipleGrowth$0.00—noNegative/zero FCF or EBITDA — equity value floored at $0
Relative ValuationRelative$273.900.72xyesP/E 28x (static sector reference · 2026-04), scenarios: 23.4x / 28.0x / 32.6x (bear / base = reference held flat / bull), EV/EBITDA 18x
Simple DDMGrowth——no—
Two-Stage DDMGrowth$132.971.48xyesStage 1: 9% for 5yr, Stage 2: 3.5% perpetual
Simple Excess ReturnAsset$103.231.91xyesBV/sh $18.17, ROE (TTM) 52.6%, ke 9.3%
Two-Stage Excess ReturnAsset$307.750.64xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$166.611.18xyesRev $12.8B, growth 9% (input: historical growth; tapered), Terminal P/S: 1.5x / 1.8x / 2.1x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$113.161.74xyesEPS $9.43, growth 9% (input: historical EPS growth), PEG=2.42 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$65.033.02xyesNormalized EBIT (5y avg op income, one-time charges added back) $1.29B × (1−13%) / WACC 8.2% → EPV (no growth)
Residual IncomeAsset$167.761.17xyesBV $18.17 + 5yr PV of (ROE (TTM) 52.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$62.093.17xyes√(22.5 × EPS $9.43 × BVPS $18.17) — Graham's conservative floor
EV/EBITDA RelativeRelative$257.440.76xyesEBITDA $2.00B × sector EV/EBITDA 18.0x
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$201.990.97xyesEPS $9.43 × (8.5 + 2×8.5%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$9.5120.68xyesBV $18.17 × (ROIC 4.3% / WACC 8.2%) (excluded from median)
P/Sales SectorRelative$496.000.40xyesRevenue $12.76B × sector P/S 4.5x
PEG Fair ValueRelative$120.641.63xyesEPS $9.43 × (PEG 1.5 × growth 8.5% (input: historical EPS growth)) → PE 12.8x
Earnings YieldEarnings$101.951.93xyesEPS $9.43 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$3.9b
Net debt / NOPAT (after-tax)3.03x
Net debt / operating income (pre-tax)2.64x
Share count CAGR (buyback)-2.5%
Burning cashno

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

At $213.27 the price embeds only about 3.1% annual operating-profit growth, a modest bar Darden cleared in fiscal 2026 with sales up 9.4% to $13.21 billion, Olive Garden comps up 4.0%, and LongHorn up 7.2%.

The headline 52.6% ROE is leverage-inflated: return on invested capital reads near 4.3% against a roughly 8.2% cost of capital, the product of heavy buybacks shrinking book value to about $18.17 per share on top of $8.1 billion of debt.

The valuation rests on a sector multiple holding (relative methods near $257 to $274) while earnings-power and asset methods sit far below (about $62 to $103), and the stock fell on a Q4 beat as fiscal 2027 EPS guidance of $11.10 to $11.35 landed below Street expectations.

Bull Case

At $213.27 the market is pricing Darden as a steady, mid-single-digit grower, and the company keeps clearing that bar. Inverted to operating economics, the price embeds roughly 3.1% annual operating-profit growth, a pace that sits comfortably within what Darden has delivered. The fiscal 2026 results just reported show why that bar is reasonable: full-year sales rose 9.4% to $13.21 billion, with Olive Garden same-restaurant sales up 4.0% and LongHorn up 7.2%. The Q4 print was a beat on the bottom line, adjusted EPS of $3.66 against a $3.63 estimate, on net sales up 13.7% to $3.72 billion. The bet the price is making is modest, and the business is running ahead of it.

The second leg is the brand portfolio and the scale underneath it. Darden runs Olive Garden and LongHorn alongside Cheddar's, Chuy's, Yard House, Ruth's Chris, The Capital Grille, and others as operating segments, with segment profit measured at restaurant-level earnings [DRI FY2025 10-K, accession 0000940944-25-000038]. That diversification across casual, steak, and fine dining smooths the cycle: when Olive Garden's traffic is merely solid, LongHorn's 9.5% Q4 comp carries the quarter. The supply chain and purchasing scale of a $13 billion restaurant operator is a genuine cost moat that smaller chains cannot match.

The third leg is the cash return, which is substantial and growing. Alongside earnings, Darden authorized a new $1.5 billion share repurchase and raised the dividend 8%. The reported traffic growth across all income cohorts suggests a customer base that is cautious but resilient, exactly the profile that keeps a value-oriented casual operator full. For fiscal 2027 management guided EPS of $11.10 to $11.35 and 75 to 80 new restaurant openings, a continuation of the same playbook: open units, comp positively, return cash. A price asking for 3% growth from a company executing at a high single-digit clip is not a demanding setup.

Bear Case

The cleaner way into the bear case on Darden is through capital allocation, because the company's returns look spectacular for a reason that should give pause. Reported ROE is 52.6%, a number that screams quality, but the ROIC-justified book model reads return on invested capital at only about 4.3% against a roughly 8.2% cost of capital. The gap between a sky-high ROE and a modest ROIC is leverage and a shrunken equity base: years of aggressive buybacks have pushed book value down to about $18.17 per share, which mechanically inflates ROE while the actual return on all the capital deployed (including the $8.1 billion of debt) is below the cost of that capital. The market sees the headline 52.6% and pays a premium; the underlying capital efficiency does not obviously support it.

That leverage is the structural risk. Net debt sits near $7.9 billion against $8.1 billion of gross debt, and a casual dining operator carries heavy fixed costs in leases and labor on top of that. The model works while comps are positive and traffic holds, but Olive Garden, the largest segment at 43% of the business, posted a Q4 comp of 2.4% against analyst expectations near 3.2%, and management's fiscal 2027 guidance of $11.10 to $11.35 came in below the roughly $11.40 the Street wanted. The stock fell on the print despite the EPS beat, which tells you the market was already pricing a smoother ride than the company delivered.

The valuation methods reinforce the caution. The earnings-power and asset-floor methods land far below the price: Earnings Power Value at about $64, Graham Number around $62, the simple excess-return floor near $103. The only methods that reach $213 are the ones stamping a sector multiple on the stock (Relative Valuation about $274, EV/EBITDA Relative about $257). When the conservative, business-anchored methods say expensive and only the multiple-borrowed methods say fair, the honest read is that Darden is priced for continued execution with little margin for a consumer slowdown, and casual dining is precisely the category that softens first when middle-income spending tightens.

Valuation

Darden's price is justified by relative multiples, while the asset and earnings-power methods say it is expensive, and that split is the whole valuation story. At $213.27 the inversion prices the business at roughly 21.8 times operating income, which solves to an implied operating-profit growth of about 3.1% per year, well within the company's recent track record. The priced-in assumption reads as within range, so the price is not making an aggressive growth bet; it is paying a full multiple for a steady one.

The method X-ray shows where the support comes from. The methods that reach the price are multiple-based: Relative Valuation at about $274 (sector P/E of 28x) and EV/EBITDA Relative at about $257. Those say Darden deserves to trade where comparable restaurant operators trade. The excess-return methods are wide apart ($103 simple, $308 two-stage) because the 52.6% trailing ROE is leverage-inflated against an $18.17 book value, which is also why the ROIC-justified book model collapses to roughly $9 on a 4.3% ROIC.

The synthesis is a high-quality, scaled operator priced as one. The cash generation is real, the dividend was just raised 8%, and a fresh $1.5 billion buyback is in place. But the price already embeds the multiple holding and the comps continuing, and the conservative methods leave little cushion if either the consumer or the multiple gives way. This is a fairly-to-fully-priced compounder, not a value name.

Catalysts

The defining recent event is the Q4 and full fiscal 2026 report on June 25, 2026. Adjusted EPS of $3.66 beat the $3.63 estimate and rose 22.8% year over year, and net sales grew 13.7% to $3.72 billion. The segment story was mixed: LongHorn Steakhouse posted same-restaurant sales of 9.5%, well ahead of the roughly 7.1% expected, while Olive Garden grew 2.4%, short of the roughly 3.2% analysts modeled. For the full year, sales rose 9.4% to $13.21 billion. The stock slipped about 1.6% on the print, a sign the market wanted more from Olive Garden and from guidance.

Guidance set the bar for the year ahead. Management projected fiscal 2027 total sales of $13.60 to $13.75 billion, EPS from continuing operations of $11.10 to $11.35, same-restaurant sales growth of 2.5% to 3.5%, and 75 to 80 new openings. The EPS range came in below the roughly $11.40 consensus, the main reason for the muted reaction. Olive Garden traffic trends and the pace of new-unit openings are the operating catalysts to track through fiscal 2027.

Capital allocation is the offsetting positive. Darden authorized a new $1.5 billion share repurchase program and raised its dividend 8% alongside the results. Analyst sentiment stayed constructive, with Deutsche Bank lifting its target to $236, BTIG and Guggenheim moving to $235, and a consensus rating around Moderate Buy with a target near $228. Commentary highlighted traffic growth across all income cohorts as evidence of a cautious but resilient customer, with the central debate being whether Olive Garden can reaccelerate its comp.

Sources: https://www.cnbc.com/2026/06/25/darden-restaurants-dri-q4-2026-earnings.html , https://finance.yahoo.com/markets/stocks/articles/darden-restaurants-q4-fiscal-2026-123120353.html , https://www.benzinga.com/analyst-stock-ratings/price-target/26/06/60130643/darden-restaurants-stock-slips-despite-earnings-beat-analysts-say-longhorn-still-leads-the-menu , https://www.investing.com/news/analyst-ratings/guggenheim-raises-darden-stock-price-target-to-235-ahead-of-earnings-93CH-4757940

Peer Cohorts (Per Segment, With Filing Citations)

Olive Garden (reported)

LongHorn Steakhouse (reported)

Fine Dining (reported)

Other Business (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive DRI report on boothcheck