Dine Brands has had an impressive run over the past six months as its shares have beaten the S&P 500 by 25.8%. The stock now trades at $31.01, marking a 30.9% gain. This run-up might have investors contemplating their next move.

Is now the time to buy Dine Brands, 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.

Why Do We Think Dine Brands Will Underperform?

We’re happy investors have made money, but we're sitting this one out for now. Here are three reasons why DIN doesn't excite us and a stock we'd rather own.

1. Shrinking Same-Store Sales Indicate Waning Demand

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

Dine Brands’s demand has been shrinking over the last two years as its same-store sales have averaged 1.6% annual declines.

2. Shrinking Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Analyzing the trend in its profitability, Dine Brands’s operating margin decreased by 4.3 percentage points over the last year. Even though its historical margin was healthy, shareholders will want to see Dine Brands become more profitable in the future. Its operating margin for the trailing 12 months was 17.7%.

3. High Debt Levels Increase Risk

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Dine Brands’s $1.6 billion of debt exceeds the $128.2 million of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $219.7 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. Dine Brands 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 Dine Brands can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Dine Brands, we’ll be cheering from the sidelines. With its shares outperforming the market lately, the stock trades at 6.5× forward P/E (or $31.01 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere. Let us point you toward one of our all-time favorite software stocks.

High-Quality Stocks for All Market Conditions

ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.

Find out which 5 stocks it's flagging for this month — FREE. Get Our Top 5 Growth Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.