Darden has been treading water for the past six months, recording a small return of 3.5% while holding steady at $207.34.

Is now the time to buy Darden, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

We're swiping left on Darden for now. Here are three reasons why we avoid DRI and a stock we'd rather own.

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Darden’s 6% annualized revenue growth over the last six years was mediocre. This was below our standard for the restaurant sector.

Same-store sales is a key performance indicator used to measure organic growth at restaurants open for at least a year.

Darden’s demand within its existing dining locations has been relatively stable over the last two years but was below most restaurant chains. On average, the company’s same-store sales have grown by 1.7% per year.

Gross profit margins are an important measure of a restaurant’s pricing power and differentiation, whether it be the dining experience or quality and taste of food.

Darden has bad unit economics for a restaurant company, giving it less room to reinvest and grow its presence. As you can see below, it averaged a 21.5% gross margin over the last two years. That means Darden paid its suppliers a lot of money ($78.54 for every $100 in revenue) to run its business.

Darden isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 19.3× forward P/E (or $207.34 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.

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