Buy Darden Restaurants for the Value, Ignore the Price

Correction: Corrects in the second paragraph the day Darden reports earnings.

NEW YORK (TheStreet) -- "Price is what you pay. Value is what you get," said Warren Buffett. Price should not be the sole factor when making an investment decision.

That's why, despite shares of specialty dinning operator Darden Restaurants (DRI) being expensive at 37 times earnings, you should own the stock ahead of fiscal fourth-quarter earnings Tuesday based on its value. 

Darden, Orlando, Fla., owner of LongHorn Steakhouse and Olive Garden, has had a good run. Its comparable same-restaurant sales are climbing at all of its restaurants, and the stock, at $69, is up 18% for the year to date and for the last six months.

By comparison, the PowerShares Dynamic Food & Beverage Portfolio (PBJ) has gained 7.7% for the year to date and 6% for the past six months. The exchange-traded fund includes Starbucks (SBUX) and Chipotle Mexican Grill (CMG).

Another reason for the value conscious to buy: Darden pays a 55-cent quarterly dividend, yielding 3.30% annually.

Darden's focus on increasing traffic at its signature restaurant, Olive Garden, is paying off. The company is developing new menu items, simplifying its kitchen operations and revamping the look and appeal of its restaurant to give customers a better experience. Perhaps equally important, Darden has embraced technology by ramping up its online-ordering platform, which could lower overhead costs.

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