Download PDF

1. Company Snapshot

1.a. Company Description

The Wendy's Company, together with its subsidiaries, operates as a quick-service restaurant company.It operates through three segments: Wendy's U.S., Wendy's International, and Global Real Estate & Development.The company is involved in operating, developing, and franchising a system of quick-service restaurants specializing in hamburger sandwiches.


As of January 2, 2022, it operated approximately 403 company-operated restaurants; 5,535 franchised restaurants in the United States; and 1,006 franchised restaurants internationally.The company also owns and leases real estate properties.It owns 485 and leases 1,235 properties, which are leased or subleased to franchisees.


The company was formerly known as Wendy's/Arby's Group, Inc.and changed its name to The Wendy's Company in July 2011.The Wendy's Company was founded in 1969 and is headquartered in Dublin, Ohio.

Show Full description

1.b. Last Insights on WEN

The Wendy's Company's recent performance was negatively impacted by disappointing earnings and concerns over aggressive shareholder returns. Despite a better-than-expected Q3 earnings report, analysts cut their forecasts, citing weak traffic trends and competitive pressure. The company's reliance on breakfast and new chicken strip offerings has failed to drive meaningful traffic. Aggressive stock buybacks and high dividends have raised concerns about long-term growth prospects. The company has launched "Project Fresh," a strategic plan to drive growth and enhance value creation.

1.c. Company Highlights

2. Wendy's Delivers Mixed Q3 Results Amidst U.S. Business Revamp

Wendy's reported a global system-wide sales decline of 2.6% in Q3, driven by a 4.7% decline in U.S. same-restaurant sales. However, the company's adjusted EBITDA was $138 million, up 2.1% versus the prior year. The actual EPS came out at $0.24, beating estimates of $0.2. The company's U.S. business remains under pressure, but the international segment delivered strong system-wide sales growth of 8.6%. The company's adjusted EPS and EBITDA growth were supported by a reduction in capital expenditures and build-to-suit investments, along with tax benefits related to the 2025 Tax and Reconciliation Act.

Publication Date: Nov -10

📋 Highlights
  • International Sales Growth:: System-wide sales increased by 8.6%, driven by same-restaurant growth and new openings.
  • U.S. Comp Sales Decline:: Same-restaurant sales fell by 4.7%, underperforming expectations amid competitive pressures.
  • Free Cash Flow Outlook:: Raised to $195M–$210M in 2025 due to reduced capital expenditures and tax benefits.
  • Project Fresh Priorities:: Shift to growing average unit volumes over net unit growth, with a focus on brand revitalization and operational efficiency.
  • Restaurant Closures:: Mid-single-digit percentage of U.S. underperforming restaurants may close as part of system optimization.

Operational Highlights

The company is making meaningful progress on key actions to enhance the customer experience, particularly in its U.S. company-operated restaurants, which significantly outperformed the overall system in Q3. The company launched Project Fresh, a comprehensive turnaround plan to drive profitable growth and long-term value across its U.S. system. The plan focuses on brand revitalization, operational excellence, system optimization, and capital allocation. As Ken Cook stated, "We're combining our internal expertise with an industry-leading consulting firm to strengthen our brand positioning and enhance marketing effectiveness."

Project Fresh Initiatives

The company is working to revitalize the Wendy's brand by using high-quality ingredients and telling its quality story with greater focus and relevance for today's consumer. The company is also investing in digital menu boards and Fresh AI to deliver more consistent, high-quality drive-thru interactions. Additionally, the company is evaluating underperforming restaurants in its system and developing action plans to improve them, which could result in around a mid-single-digit percentage of U.S. restaurants closing.

Valuation Insights

With a P/E Ratio of 9.58 and a Dividend Yield of 8.7%, the company's valuation appears reasonable. The EV/EBITDA ratio of 13.49 suggests that the company's enterprise value is relatively high compared to its EBITDA. Analysts estimate next year's revenue growth at 3.0%, which may be a reasonable expectation given the company's initiatives to drive growth. The company's ROE of 121.69% and ROIC of 5.0% indicate a strong return on equity but a relatively lower return on invested capital.

Outlook

The company is maintaining its outlook for full-year global system-wide sales, adjusted EBITDA, and adjusted EPS. However, it is increasing its outlook for free cash flow to between $195 million to $210 million, an increase of $35 million at the midpoint of the range compared to its prior outlook. The company's strong free cash flow underpins its ability to fund investments in the business and return capital to shareholders.

3. NewsRoom

Card image cap

Wendy's: Too Cheap To Ignore While It Tries To Revitalize The Brand

Dec -04

Source: seekingalpha.com

Card image cap

Here Are Wednesday’s Top Wall Street Analyst Upgrades and Downgrades: American Eagle Outfitters, Equinix, Garmin, Honeywell, Uber, Wendy’s and More

Dec -03

Source: 247wallst.com

Card image cap

17 dividend-stock bargains from a value manager with a stellar track record

Dec -02

Source: marketwatch.com

Card image cap

3 Big Stock Discounts This Black Friday

Nov -28

Source: seekingalpha.com

Card image cap

Wendy's Takes On 6-7 Meme: Can Gen Z, Gen Alpha Help Rescue Stock From 52-Week Lows?

Nov -25

Source: benzinga.com

Card image cap

Nelson Peltz's Strategic Moves: U-Haul Holding Co Exit Impacts Portfolio by -0.56%

Nov -14

Source: gurufocus.com

Card image cap

First Look: Tech Selloff, Starbucks Strike, Disney Miss

Nov -14

Source: gurufocus.com

Card image cap

Wendy's Declares First-Ever "Frosty Day" Holiday on November 15

Nov -12

Source: prnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.37%)

6. Segments

Wendy's United States

Expected Growth: 4.5%

Wendy's US growth driven by successful marketing campaigns, menu innovation, and digital transformation. Increased focus on convenience, including mobile ordering and curbside pickup, has attracted more customers. Additionally, remodels of existing locations and expansion of breakfast offerings have contributed to sales growth.

Global Real Estate & Development

Expected Growth: 3.5%

The Wendy's Company's Global Real Estate & Development segment growth of 3.5% is driven by strategic restaurant openings, remodels, and relocations, as well as increased sales from existing locations. Additionally, the company's focus on digital transformation, menu innovation, and marketing efforts contribute to the growth, while also benefiting from a favorable real estate market and effective cost management.

Wendy's International

Expected Growth: 4.2%

Wendy's International's 4.2% growth is driven by successful marketing campaigns, menu innovation, and digital transformation. The brand's focus on quality, convenience, and value resonates with customers. Additionally, strategic partnerships, such as the breakfast launch with DoorDash, and investments in restaurant remodels and technology upgrades contribute to the growth momentum.

7. Detailed Products

Burgers

Wendy's signature square-shaped beef burgers made with fresh, never frozen beef

Chicken Nuggets

Tender and juicy chicken breast pieces in a variety of sauces

Fries

Thick-cut, sea-salt fries cooked to a golden crisp

Salads

Fresh, made-to-order salads with a variety of toppings and dressings

Breakfast Items

A variety of breakfast sandwiches, burritos, and biscuits

Beverages

Soft drinks, iced tea, coffee, and Frosty desserts

Value Meals

Combination meals featuring a sandwich, fries, and a drink

8. The Wendy's Company's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for The Wendy's Company is medium because while there are many substitutes for fast food, Wendy's has a strong brand reputation and customer loyalty.

Bargaining Power Of Customers

The bargaining power of customers for The Wendy's Company is high because customers have many options for fast food and can easily switch to a competitor if they are not satisfied.

Bargaining Power Of Suppliers

The bargaining power of suppliers for The Wendy's Company is low because the company has a strong supply chain and can negotiate good prices with its suppliers.

Threat Of New Entrants

The threat of new entrants for The Wendy's Company is low because it is difficult for new companies to enter the fast food market and compete with established brands like Wendy's.

Intensity Of Rivalry

The intensity of rivalry for The Wendy's Company is high because the fast food industry is highly competitive and companies like McDonald's, Burger King, and KFC are strong competitors.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 90.14%
Debt Cost 4.10%
Equity Weight 9.86%
Equity Cost 7.82%
WACC 4.46%
Leverage 914.09%

11. Quality Control: The Wendy's Company passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Darden

A-Score: 6.3/10

Value: 3.9

Growth: 6.0

Quality: 5.2

Yield: 6.0

Momentum: 8.0

Volatility: 8.7

1-Year Total Return ->

View Full Report
Stock-Card
Wendy's

A-Score: 5.6/10

Value: 6.3

Growth: 5.9

Quality: 4.8

Yield: 9.0

Momentum: 0.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
Domino's Pizza

A-Score: 5.5/10

Value: 4.4

Growth: 6.3

Quality: 6.0

Yield: 3.0

Momentum: 5.0

Volatility: 8.3

1-Year Total Return ->

View Full Report
Stock-Card
Texas Roadhouse

A-Score: 5.5/10

Value: 2.6

Growth: 8.2

Quality: 5.7

Yield: 4.0

Momentum: 4.0

Volatility: 8.3

1-Year Total Return ->

View Full Report
Stock-Card
Brinker

A-Score: 5.3/10

Value: 5.8

Growth: 8.0

Quality: 5.4

Yield: 0.0

Momentum: 8.5

Volatility: 4.3

1-Year Total Return ->

View Full Report
Stock-Card
Wingstop

A-Score: 4.2/10

Value: 2.5

Growth: 9.4

Quality: 6.3

Yield: 2.0

Momentum: 1.5

Volatility: 3.3

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

8.44$

Current Price

8.44$

Potential

-0.00%

Expected Cash-Flows