Growth At A Reasonable Price

It’s been a much better year thus far for the major market averages, and several tech names have soared more than 30% off their lows just seven weeks into the year after coming into 2023 at deeply oversold levels.

Although this has been a nice move for those quick enough to establish positions, there are far less attractive setups out there currently, and one must be rigid with their stock selection.

In this update, we’ll look at one semi recession resistant growth story and another company that continues to gobble up market share that are both worth keeping at the top of one’s watchlist if we see a deeper market correction.

Visteon Corporation (VC)

Visteon Corporation (VC) is a $4.6 billion company in the Auto-Truck and Original Equipment industry group and is a global automotive electronics supplier that was spun out from Ford Motor Company (F) in April 2000.

Visteon Corporation differentiates itself from its auto parts peers given that it is the only pure-play supplier of automotive cockpit electronics, the fastest-growth segment within the industry.

For those unfamiliar, the segment is forecasted to grow from $36 billion to $60 billion in 2027, and this incredible growth showed up in Visteon’s most recent Q4 results, with revenue up 35% to $1.06 billion, well above the low double-digit sales growth reported by peers in the same period.

On a full-year basis, Visteon had an incredible year, launching 45 new products (13 in Q4 alone), nailing down $6.0 billion in new contracts, and ending the year with a strong balance sheet, evidenced by $174 million in net cash.

This certainly showed up in its financial results, with record revenue of $3.76 billion (40% growth year-over-year) and 153% annual EPS growth ($5.33 vs. $2.11), a new record for the company.

However, while this is incredible growth relative to FY2020 levels ($2.77) the forward outlook is just as impressive, with annual EPS expected to increase to $9.98 in FY2024, pointing to nearly 90% growth over the next two years.

Visteon noted that the strong growth was driven by favorable pricing and capital discipline from a capital expenditures standpoint, plus significant wins in SmartCore and advanced display programs with major original equipment manufacturers.

Looking at the FY2035 guidance, the company is expecting to report upwards of $4.0 billion in annual revenue and up to $130 million in adjusted free cash flow, allowing the company to maintain a very strong balance sheet while investing in its business.

This is a very enviable position to be in vs. its peers, benefiting from high-growth segments within the auto parts space, having the capital to invest to maintain its market-leading position, and already operating from a position of strength which could allow it to do small bolt on deals with shares or cash to strengthen its position even further.

Based on what I believe to be a fair multiple of 21x earnings given its market-leading position and FY2024 annual EPS estimates of $9.98, I see a fair value for Visteon (18-month target price) of $209.60, translating to 29% upside from current levels.

That represents a very attractive upside case given that I see these earnings estimates as achievable and beatable, and the stock’s technical picture is confirming this robust outlook, with VC recently breaking out to new all-time highs from a multi-year base.

While the stock is a little bit extended short-term after this breakout and a strong Q4 report, I would expect any pullbacks towards this base at $152.00 to provide buying opportunities.

Restaurant Brands International (QSR)

Restaurant Brands International (QSR) is a $20.6 billion company with four iconic brands (Popeyes, Burger King, Tim Hortons, Firehouse Subs) in the restaurant group.

While QSR has underperformed its peers in the restaurant space which is somewhat understandable due to Burger King lagging its burger peers domestically, its turnaround is beginning to gain traction and its other iconic brands continue to grow like weeds and fire on all cylinders.

This turnaround is being accelerated by a management shake-up, with a new CEO announced in its most recent quarter, and a new Executive Chairman in Patrick Doyle, who delivered a 2,000% return for shareholders at Dominos Pizza (DPZ).

Restaurant Brands International’s Executive Chairman Patrick Doyle recently stated that he believes “the company’s four iconic brands can be dramatically larger than they are today”, and with three of these brands still in their early to middle innings from a growth standpoint, there is considerable opportunity to execute on this goal given their whitespace.

In fact, Popeyes Chicken and Firehouse Subs have barely 5,000 stores combined, which is a fraction of the number of KFC locations (26,000 locations) and Subway stores (37,000) that there are globally.

Looking at Firehouse Subs specifically, there are over 32,000 Subway locations in markets where Restaurant Brands is already established, with Firehouse Subs not yet present in 90% of these markets (Germany, UK, Mexico, Brazil, Australia, South Korea, France).

This is a massive growth opportunity for Firehouse, and I would not be surprised to see Firehouse Subs ultimately triple its store count to 5,000 stores long-term, translating to significant earnings growth for Restaurant Brands.

Meanwhile, Popeyes could easily be a 12,000-store opportunity (4,000 currently) vs. 26,000+ KFC locations, and Restaurant Brands has already proven its success growing internationally with Burger King and can leverage off existing infrastructure.

From a bigger picture standpoint, Restaurant Brands International is unique vs. large-cap peers like McDonald’s in that it is growing its units at a mid single-digit to low double-digit level for its smallest three brands, and it’s simultaneously seeing a turnaround in its largest brand, Burger King.

This was evidenced by 8.4% same-store-sales growth in Q4 for Burger King which was below estimates, but a step in the right direction after two years of underperformance post-pandemic.

However, with the Reclaim the Flame initiative now underway, marketing improving and also progress to move operations into the hands of stronger franchisees, I would expect improved sentiment around Burger King to help push the stock to higher prices and help it to command a multiple more in line with its peers.

Currently, QSR trades at a more than 300 basis point discount to peers with similar or lower growth, and I see this as an opportunity for investors willing to be contrarian in the early stages of this turnaround.

Based on what I believe to be a fair earnings multiple of 24 and FY2024 annual EPS estimates of $3.38, I see a fair value for the stock of $81.10, translating to more than 20% upside from current levels or 23% on a total return basis.

Given that I require a minimum 25% discount to fair value to justify starting or adding to new positions, the stock is not in a low-risk buy zone currently.

However, if we were to see the stock decline below $61.00 where it would dip into a low-risk buy zone, I would view QSR as a Buy, with it being one of the more attractive growth stories in the market, with a relatively recession resistant brand (quick-service) and a very reasonable valuation.


While there are dozens of growth stories out there, several market leaders are sitting at rich valuations after rallying sharply off last year’s lows and others that are less expensive are more sensitive to a recessionary environment.

In Restaurant Brands and Visteon’s case, neither stock is expensive given its steady growth, with this especially true for Restaurant Brands that also sports a very attractive dividend yield (~3.30%).

So, for investors looking for growth at a reasonable price, I see QSR as attractive below $61.00, and VC as a solid buy-the-dip candidate below $152.00, where it would re-test its multi-year breakout level.

Disclosure: I am long VC, QSR

Taylor Dart Contributor

Disclaimer: This article is the opinion of the contributor themselves. Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information in this writing.