DRI, Darden Restaurants, Inc.
These restaurants will be franchise-owned and will operate as members of our Olive Garden International family.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- A retailer, earning thin margins on high volume where inventory turns and scale decide the outcome.
- What moves the needle
- Sales per store and how fast inventory moves. What decides it: same-store sales, inventory turns, and whether thin margins survive a price war.
- Is it a good business?
- Return on capital has run high across the record (median 26%, above 15% in 9 of 10 years). High, durable returns can mark a moat, but whether this one is real pricing power or an accounting artifact is the judgment the 10-K is for.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
The record, 2016–2025
realized figures from each filing, no estimates| 2016’16 | 2017’17 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMFeb 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $6.9B | $7.2B | $8.1B | $8.5B | $7.8B | $7.2B | $9.6B | $10.5B | $11.4B | $12.1B | $12.8B |
| Gross marginGross mgn | — | — | — | — | — | — | — | — | — | — | 59% |
| Operating marginOp. mgn | 9.0% | 9.4% | 9.5% | 9.8% | 0.6% | 9.0% | 12.1% | 11.5% | 11.5% | 11.3% | 11.4% |
| Net incomeNet inc. | $375M | $479M | $596M | $713M | ($52M) | $629M | $953M | $982M | $1.0B | $1.0B | $1.1B |
| EPS (diluted)EPS | $2.90 | $3.80 | $4.73 | $5.69 | $-0.43 | $4.77 | $7.39 | $7.99 | $8.51 | $8.86 | $9.47 |
| ROICROIC | 24% | 18% | 26% | 27% | 2% | 26% | 38% | 39% | 34% | 29% | 32% |
| Cash & investmentsCash+inv | $275M | $233M | $147M | $457M | $763M | $1.2B | $421M | $368M | $195M | $240M | $263M |
| Net debt / (cash)Net debt | $165M | $704M | $780M | $470M | $166M | ($285M) | $480M | $517M | $1.2B | $1.9B | $1.9B |
Owner’s Scorecard
Will it survive?
- Can it pay its interest? 11.8×ComfortableOperating income $1.4B ÷ interest expense $116M
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.
- ConservativeTotal debt $2.1B ÷ operating income $1.4B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash $1.9BModest net debtCash $240M − debt $2.1B
Netting $240M of cash and short-term investments against $2.1B of debt leaves $1.9B owed, about 1.4× a year's operating profit, versus the gross figure above. It also holds $22M in longer-dated marketable securities; counting those, it sits at $1.9B of net debt. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- Not enough data
The filing data didn't include the inputs for this check.
Is it a good business?
- ExceptionalNOPAT $1.2B ÷ invested capital $4.2B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Not enough data
The filing data didn't include the inputs for this check.
- Not enough data
The filing data didn't include the inputs for this check.
How is the cash used?
- Not enough data
The filing data didn't include the inputs for this check.
- Investing or harvesting? 1.25×ExpandingCapex $645M ÷ depreciation $516M
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2016–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 9 of 10
Lost money in 1 year(s), look at what happened there before trusting the average.
- Return on capital ≥ 15% 9 of 10 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 9% (FY2016) → 11% (FY2025)
Margins widened over the record, pricing power intact or improving.
- Reinvestment, incremental ROIC 67%
Every extra dollar the company reinvested earned a high return, it is still compounding, not coasting on an old moat.
- Worst year 2020 · 0.6% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
- Share count −1.0%/yr
The share count is shrinking, buybacks are quietly growing your slice of the business.
- Dividend record rising
Paid and raised the dividend across the record, the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
Management & pay
Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- Stock-based compensation$79M
The slice of the business handed to employees in shares this year, 1% of revenue, equal to 6% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
3 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $12.1B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity MissCurrent ratio ≥ 2× · 0.42×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt MissDebt ≤ working capital · $2.1B vs ($1.3B) WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability NearA profit every year (10-yr record) · 1 loss year
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (10)
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth PassEarnings +33% over the record · +111%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $8.86/share and book value $19.52/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFOwner earnings are negative today, so the usual reverse-DCF has nothing to grow. But that's exactly when a price makes its boldest promise. So we flip the question: type a price, and see the future profitability you'd have to believe to justify it.
Enter a price to run it.
It flips the reverse-DCF: the company must reach owner earnings that, valued at a mature multiple and discounted back at your rate, equal today's market cap, shown as the margin it must earn on revenue grown at your rate, from negative today. For a deep cyclical at a trough, normalized through-cycle earnings are the better lens; this is for the genuinely unprofitable.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Pricing power & competitionRisk Factors
Whether the company sets its price or takes it. Durable pricing power is the surest mark of a moat; price competition is the surest mark there isn't one.
“The full-service dining sector of the restaurant industry is intensely competitive with respect to pricing, service, location, personnel, take-out and delivery options and type and quality of food, and there are many well-established competitors.”
From the recordOperating margin11.4% (TTM), near a 10-yr high - Supplier & input dependenceRisk Factors
A choke point upstream. A sole or limited supplier can dictate terms, and a single shortage can stop the line.
“We have a limited number of suppliers and distributors for certain of our products and services.”
From the recordGross-margin cushion (TTM)59% - Concentrated dependenceRisk Factors
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“Our results of operations depend significantly on our ability to anticipate and react to changes in the price and availability of food, ingredients, labor, health care, utilities, fuel and other related costs over which we may have little control.”
From the recordRevenue (TTM)$12.8B - Debt terms & refinancingMD&A
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“As of May 25, 2025, we had no outstanding balances and were in compliance with all covenants under the Revolving Credit Agreement.”
From the recordBalance sheet (TTM)$1.9B modest net debt · interest covered 11.8× - Litigation & contingenciesRisk Factors
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“Our business is subject to the risk of litigation by employees, guests, suppliers, business partners, shareholders, government agencies or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation.”
A judgment, not a number, weigh it against the filing yourself. - Cyclicality & demandRisk Factors
How the business behaves when the economy turns. A cyclical earns its keep across the whole cycle, not at the peak.
“General economic conditions, including slow global recovery from economic downturns, geopolitical conditions and uncertainty about the strength or pace of economic recovery, have also adversely affected our results of operations and may continue to do so.”
From the recordWorst year on record0.6% operating margin (FY2020) - Regulation & policyBusiness
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“Department of Labor (DOL) announced updates to the Fair Labor Standards Act overtime rules that, in two stages, one on July 1, 2024 and a second on January 1, 2025 increase the salary threshold above which non-exempt workers are required to be paid overtime.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “Impairments and disposal of assets, net increased as a percent of sales primarily due to the decision to close twenty-two underperforming restaurant locations during the fourth quarter of fiscal 2025.”
- “Per the Amendment, our adjusted debt to EBITDAR ratio must be 3.50 to 1.00 or lower in order to be in compliance with our financial covenants.”
- “The introduction of or changes to tariffs or adverse impacts resulting from restrictive trade policies or trade disputes on imported food products, such as produce and seafood, could increase our costs and possibly impact the supply of those products. 14 We cannot predict whether we will continue to…”
- “If we fail to anticipate changing trends or other consumer preferences, our business, financial condition and results of operations could be adversely affected. 19 Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could have a material ad…”
- “Anticipated changes in immigration laws and regulations could decrease the pool of candidates with legal work authorizations, cause disruption in the workforce for all companies that rely on hourly workers and increase the costs, time and requirements to hire new employees.”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Restaurants
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| SBUXStarbucks Corporation | $37.2B | 77% | 7.9% | 143% | 7% |
| MCDMcdonald’s Corporation | $26.9B | — | 46.1% | 26% | 27% |
| DRIDarden Restaurants, Inc. | $12.1B | 59% | 11.3% | 29% | — |
| CMGChipotle Mexican Grill, Inc. | $11.9B | — | 16.2% | 60% | 12% |
| YUMYum! Brands, Inc. | $8.2B | 70% | 31.3% | 49% | 20% |