Wendy's Co (NASDAQ: WEN)

Sector: Consumer Cyclical Industry: Restaurants CIK: 0000030697
Market Cap 1.61 Bn
P/B 14.75
P/E 8.65
P/S 0.73
ROIC (Qtr) 6.23
Div Yield % 11.19
Rev 1y % (Qtr) -3.04
Total Debt (Qtr) 4.12 Bn
Debt/Equity (Qtr) 37.72

About

Wendy's Company, also known as Wendy's, is a distinguished player in the fast-food restaurant industry, with its stock symbol being WEN. The company's primary business activities revolve around operating, developing, and franchising a unique system of quick-service restaurants that offer high-quality food. Wendy's operates in various countries and regions, including the United States and over 32 foreign countries and U.S. territories. The company generates revenue through the operation of its restaurants, which provide a variety of menu items such...

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Price action

Investment thesis

Bull case

  • Operating cash flow of 343.89M provides strong 24.05x coverage of stock compensation 14.30M, indicating sustainable incentive practices.
  • Robust free cash flow of 237.82M exceeds capital expenditure of 106.07M by 2.24x, indicating strong organic growth funding capability.
  • Tangible assets of 3.02B provide exceptional 34.38x coverage of deferred revenue 87.96M, showing strong service capability backing.
  • Operating cash flow of 343.89M provides strong 3.91x coverage of deferred revenue 87.96M, indicating service delivery capability.
  • Tangible assets of 3.02B provide robust 11.45x coverage of other current liabilities 264.05M, indicating strong asset backing.

Bear case

  • Operating cash flow of 343.89M barely covers its investment activities of (161.07M), with a coverage ratio of -2.14, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 343.89M provides thin coverage of dividend payments of (153.99M) with a -2.23 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 325.75M provide limited coverage of acquisition spending of (13.64M), which is -23.87x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 128.46M relative to inventory of 6.93M (18.52 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating earnings of 389.58M show weak coverage of depreciation charges of 162.67M, with a 2.39 ratio indicating high capital intensity and potential reinvestment needs.

Peer comparison

Companies in the Restaurants
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MCD Mcdonalds Corp 222.05 Bn 26.39 8.45 55.82 Bn
2 SBUX Starbucks Corp 95.51 Bn 51.45 2.57 26.61 Bn
3 CMG Chipotle Mexican Grill Inc 50.94 Bn 33.15 4.32 4.98 Bn
4 YUM Yum Brands Inc 43.17 Bn 29.83 5.36 11.55 Bn
5 QSR Restaurant Brands International Inc. 22.43 Bn 24.33 2.42 15.64 Bn
6 DRI Darden Restaurants Inc 21.91 Bn 19.91 1.77 6.16 Bn
7 YUMC Yum China Holdings, Inc. 18.12 Bn 20.05 1.57 1.84 Bn
8 DPZ Dominos Pizza Inc 14.57 Bn 24.72 3.01 5.05 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.08 2.05
EV to Cash from Ops. EV/CFO 15.65 16.57
EV to Debt EV to Debt 1.31 4.75
EV to EBIT EV/EBIT 13.82 3.45
EV to EBITDA EV/EBITDA 10.00 9.76
EV to Free Cash Flow [EV/FCF] EV/FCF 22.64 29.06
EV to Market Cap EV to Market Cap 3.34 6.55
EV to Revenue EV/Rev 2.44 2.40
Price to Book Value [P/B] P/B 14.75 -1.40
Price to Earnings [P/E] P/E 8.65 13.35
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.21 -9.56
Dividend Payout Ratio % Div Payout % (Qtr) 82.10 18.72
Dividend per Basic Share Div per Share (Qtr) 0.78 0.84
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 62.50 30.41
Interest Coverage Int. cover (Qtr) 3.12 -86.85
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -29.84 -24.56
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -37.04 35.50
Dividend Growth (1y) % Div 1y % (Qtr) -22.00 -0.72
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -2.95 -564.81
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 3.05 25.78
EBIT Growth (1y) % EBIT 1y % (Qtr) -0.69 -507.68
EBT Growth (1y) % EBT 1y % (Qtr) -1.74 -41.98
EPS Growth (1y) % EPS 1y % (Qtr) 0.00 -126.51
FCF Growth (1y) % FCF 1y % (Qtr) -15.33 5,724.78
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 2.80 23.70
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.44 0.99
Cash Payout Ratio Cash Payout (Qtr) 0.34 0.07
Cash Ratio Cash Ratio (Qtr) 0.41 0.78
Current Ratio Curr Ratio (Qtr) 0.81 1.47
Debt to Equity Ratio Debt/Equity (Qtr) 37.72 0.05
Interest Cover Ratio Int Coverage (Qtr) 3.12 -86.85
Times Interest Earned Times Interest Earned (Qtr) 3.12 -86.85
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 25.00 7.71
EBIT Margin % EBIT Margin % (Qtr) 17.64 -2.27
EBT Margin % EBT Margin % (Qtr) 11.98 -1.97
Gross Margin % Gross Margin % (Qtr) 38.80 34.04
Net Profit Margin % Net Margin % (Qtr) 8.40 -3.69