By Jake Lynch, TheStreet

Darden Restaurants (DRI) ranks among analysts' favorite restaurant stocks.

But unlike Panera (PNRA) and Chipotle (CMG), Darden is a value stock rather than a growth stock. Darden owns Olive Garden, Bahama Breeze, Red Lobster, LongHorn Steakhouse, Seasons 52 and high-end steakhouse The Capital Grille. Yesterday, it announced fiscal-first-quarter results, beating analysts' earnings consensus by 3%.

Fiscal-first-quarter profit was up 20% to $113 million, or 80 cents a share, as revenue grew 4.2% to $1.8 billion, narrowly missing analysts' target. Darden's operating margin climbed from 8.8% to 10%. At the end of the quarter, the company held $78 million in cash and $1.5 billion in debt, a weak liquidity position. Darden's return on equity, a measure of profitability for investors, remained steady at 23%, beating the S&P 500 ($INX) quarterly average of 12%.

Olive Garden's quarterly sales gained 6.8%, boosted by 32 new locations. But the chain's same-store sales climbed a more modest 2.3%. Olive Garden is the largest of Darden's chains, with 727 locations.

Second-biggest Red Lobster suffered a sales decline of 0.8% and a same-store sales drop of 1.7%.

LongHorn's revenue expanded 6.8% and its same-store sales rose 2.2%.

The best-performing segment is also the smallest. Specialty restaurants, encompassing 41 Capital Grille, 25 Bahama Breeze and 11 Seasons 52 locations, boosted sales 12% and same-store sales 2.7%.

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Seasons 52 is a new concept that is receiving favorable customer reviews. It focuses on seasonal ingredients, particularly local fruits and vegetables.

However, it is still too small to have a material effect on Darden's operating performance, with just 11 locations to date.

Investors should consider Darden for its value, as the company is the world's largest full-service restaurant company. Darden doesn't franchise restaurants domestically, but several international locations are outside corporate control.

Of analysts evaluating Darden, 21, or 75%, rate its stock "buy" and seven rate it "hold." A median price target of $51.05 suggests a return of 19% in the next 12 months. UBS (UBS) expects a rise of 26% to $54, and Piper Jaffray (PJC) predicts a climb of 23% to $53

The stock trades at a trailing earnings multiple of 15, a forward earnings multiple of 12, a book value multiple of 3.3, a sales multiple of 0.9 and a cash flow multiple of 6.6 -- 49%, 53%, 45%, 68% and 50% discounts to restaurant industry averages.

Its PEG ratio, a measure of value relative to growth, of 0.9 signals a 10% discount to fair value. Darden pays a 32-cent quarterly dividend, equal to an annual yield of 3% and a payout ratio of 38%.

The stock has declined 3.8% since the quarterly release, presenting a buying opportunity. Barclays (BCS), which rates Darden "overweight," reacted to the quarterly release by reaffirming that the stock offers the best fundamentals in a "challenged, albeit improving, sector." Barclays offers a target of $51, 15 times its 2011 earnings forecast.

Darden missed Barclays' same-store sales forecasts, but the bank remains bullish because the company exceeded researchers' forecasts for operating, pretax and net margins, solidifying the prospects of cost cutting at the chains.

Of the stock's 50 largest institutional shareholders, 29, or 58%, increased their stakes in the latest quarter; two, or 4%, held steady; and 19, or 38%, lessened their holdings.

Darden has risen 24% in 2010 and 5.3% in September.

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