NEW YORK (TheStreet) -- Burger King Worldwide (BKW) shares are experiencing volatility in early market trading on Wednesday, trading at about $32.23, despite the fast food restaurant chain being upgraded to "outperform" from "sector perform" by analysts at RBC before the opening bell today.

The firm also raised the stock's price target to $38 from its previous $30 view, representing a potential 17% upside from the stock's opening price.

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The firm believes that the company's pending merger with Canadian coffee chain Tim Hortons (THI) will prove to be a windfall for the two companies who combined will have 18,000 stores and $23 billion in annual sales.

The tax inversion deal which relocates Burger King's headquarters to Canada is also expected to save the company millions in taxes every year.

TheStreet Ratings team rates BURGER KING WORLDWIDE INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate BURGER KING WORLDWIDE INC (BKW) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and generally higher debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 9.4%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $162.50 million or 18.18% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -17.68%.
  • Compared to its closing price of one year ago, BKW's share price has jumped by 63.17%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Hotels, Restaurants & Leisure industry and the overall market, BURGER KING WORLDWIDE INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has significantly decreased by 134.4% when compared to the same quarter one year ago, falling from $68.20 million to -$23.50 million.
  • You can view the full analysis from the report here: BKW Ratings Report

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