Red Robin has gotten torched over the last six months - since June 2025, its stock price has dropped 22.6% to $4.22 per share. This may have investors wondering how to approach the situation.
Is now the time to buy Red Robin, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Do We Think Red Robin Will Underperform?
Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons we avoid RRGB and a stock we'd rather own.
1. Flat Same-Store Sales Indicate Weak Demand
Same-store sales is a key performance indicator used to measure organic growth at restaurants open for at least a year.
Red Robin’s demand within its existing dining locations has barely increased over the last two years as its same-store sales were flat.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Red Robin, its EPS declined by 19% annually over the last six years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
3. High Debt Levels Increase Risk
As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.
Red Robin’s $526.6 million of debt exceeds the $30.87 million of cash on its balance sheet. Furthermore, its 9× net-debt-to-EBITDA ratio (based on its EBITDA of $57.91 million over the last 12 months) shows the company is overleveraged.
At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Red Robin could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.
We hope Red Robin can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.
Final Judgment
Red Robin falls short of our quality standards. After the recent drawdown, the stock trades at 9.1× forward EV-to-EBITDA (or $4.22 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of Red Robin
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