NEW YORK (TheStreet) -- With McDonald's Corp.(MCD) - Get Report  and Burger King(QSR) - Get Report  deciding to push their rivalry aside for one day and join forces, we decided to check TheStreet Quant Ratings for other restaurants that would be good investments.

The plan is for the two fast-food joints to operate out of one restaurant. They will be serving up a new burger, the "McWhopper," a combination of their two most popular burgers. All the proceeds will go to a nonprofit, Peace One Day. The move is also geared toward bringing awareness to International Day of Peace.

Quant Ratings rated McDonald's as a "buy," and Burger King as a "hold."

So, what are the best restaurants investors should be buying? Here are the top three, according to TheStreet Ratings, TheStreet's proprietary ratings tool.

TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014, beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which stocks made the list. And when you're done, be sure to read about which mid-cap energy stocks you should buy now. Year-to-date returns are based on August 25, 2015 closing prices. The highest-rated stock appears last.

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SBUX

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3. Starbucks Corporation

(SBUX) - Get Report


Rating: Buy, A
Market Cap: $75.8 billion
Year-to-date return: 24.5%

Starbucks Corporation operates as a roaster, marketer, and retailer of specialty coffee worldwide. The company operates in four segments: Americas; Europe, Middle East, and Africa; China/Asia Pacific; and Channel Development.

"We rate STARBUCKS CORP (SBUX) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. We feel its strengths outweigh the fact that the company shows weak operating cash flow."

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

  • The revenue growth came in higher than the industry average of 4.0%. Since the same quarter one year prior, revenues rose by 17.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 43.02% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • STARBUCKS CORP has improved earnings per share by 22.4% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, STARBUCKS CORP turned its bottom line around by earning $1.36 versus -$0.01 in the prior year. This year, the market expects an improvement in earnings ($1.58 versus $1.36).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 22.2% when compared to the same quarter one year prior, going from $512.70 million to $626.60 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, STARBUCKS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.

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TXRH

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2. Texas Roadhouse, Inc.

(TXRH) - Get Report


Rating: Buy, A+
Market Cap: $2.5 billion
Year-to-date return: 6.1%

Texas Roadhouse, Inc., together with its subsidiaries, operates as a full-service restaurant company. The company operates its restaurants primarily under the Texas Roadhouse name.

"We rate TEXAS ROADHOUSE INC (TXRH) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins."

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

  • The revenue growth came in higher than the industry average of 4.0%. Since the same quarter one year prior, revenues rose by 15.0%. 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.
  • Compared to its closing price of one year ago, TXRH's share price has jumped by 44.32%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TXRH should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Net operating cash flow has slightly increased to $37.13 million or 3.92% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.85%.
  • TEXAS ROADHOUSE INC's earnings per share declined by 9.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TEXAS ROADHOUSE INC increased its bottom line by earning $1.23 versus $1.13 in the prior year. This year, the market expects an improvement in earnings ($1.38 versus $1.23).

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CAKE

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1. Cheesecake Factory Incorporated

(CAKE) - Get Report

Rating: Buy, A+

Market Cap: $2.5 billion

Year-to-date return: 5.3%

The Cheesecake Factory Incorporated operates full-service and casual dining restaurants. The company also produces cheesecakes and other baked products for foodservice operators, retailers, and distributors.

"We rate CHEESECAKE FACTORY INC (CAKE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, good cash flow from operations and increase in net income. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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

  • The revenue growth came in higher than the industry average of 4.0%. Since the same quarter one year prior, revenues slightly increased by 6.6%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 15.6% when compared to the same quarter one year prior, going from $30.05 million to $34.72 million.
  • Net operating cash flow has increased to $55.62 million or 23.61% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.85%.

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