Given the recent decline in the market, investors should be bargain hunting. Two firm's worthy of making a bull's shopping list are Wendy's (WEN) on valuation and Yum! Brands (YUM) on growth prospects (specifically exposure to growth in China).
Wendy's - Buy
- Restaurant industry is fragmented with weak pricing power.
- Low-price producer which serves as a substitute for high-price producers.
- Book value-share is increasing in recent quarters while price-book value is roughly 20 percent off of a recent peak.
- Share price is off of a recent high while price-sales is near a recent bottom.
- Share price could decline on U.S. economic headwinds, although, given current valuations, shares should be accumulated on significant dips.
- Q2 2012 estimated revenue of $637.5 million, an increase of 7.5 percent compared with the first quarter and 2.5 percent compared with the year-ago quarter.
- Price Target: $5.40
(Click charts to enlarge)
Yum! Brands - Buy
- Restaurant industry is fragmented with weak pricing power.
- Low-price producer which serves as a substitute for high-price producers.
- Revenue-share is increasing and should reach roughly $30 in the fourth quarter of 2012.
- China revenue-share is increasing and should reach 50 percent of total revenue at the end of 2012.
- Book value-share is rising after dipping in the Q4 2011.
- Price-sales is rising as price-book value declined in recent weeks.
- The market likes the enterprise's growth prospects.
- Economic headwinds in the U.S. could weigh on the share price in the coming months.
- Price Target: $79
(Click charts to enlarge)
Macro Picture
