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Wendy's: At Least 25% Downside From Here

Aug. 02, 2021 4:55 PM ETThe Wendy's Company (WEN)9 Comments


  • DCF analysis indicates substantial downside, with minimal (and unrealistic) pathways to justifying the current valuation.
  • Industry labor shortage, limited growth opportunities, and intense competition add to the downside story.
  • Breakfast menu upgrade is not something to hang your hat on given past track record.
Hundreds Of Wendy"s Locations Have Run Out Of Hamburgers, Amid Meat Supply Chain Disruptions During Coronavirus Pandemic
Joe Raedle/Getty Images News

After over a year of operating in uncharted waters during the pandemic, the restaurant & fast food sector didn’t exactly need a labor shortage crisis. Ask almost anyone, and they can tell you about their local favorite restaurant that closed doors

This article was written by

I previously worked in the financial sector across multiple industries, including consumer, renewable energy, technology, healthcare, and industrials. I am a traditional "buy-and-hold" investor that prefers smaller cap, value stocks based on the academic research supporting long-term returns.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (9)

GR Value profile picture
I think Wendy's is worth at best 15 to 17. At worst if some of the risks you highlight really sting it could trend down towards 8 to 11. Let's remember here, book is negative 8 dollars after 15 years they still have severe negative equity and prices are high.

Insiders sold a whole lot at 22 and 23 recently. It's still over 21 and in my opinion a screaming sell over 18.
What do you think now after blowout Q2 earnings and upgrade on 2H
@TBRR The author has gone AWOL. Where are you Mr. Value. We need your insight. Come and tell us where to go from here……
Dividend increased 20% today
Wendy’s around here are poorly managed. It’s a shame because I like their food. They could do a ton more business if the service was better. I bought it at $8.23, but I can’t see growth at this point.
Simple have to say I think you are wrong. PE, forward PE and PEG all are at or below prior. 5 year average. 5 and 10 year chart are stellar. Price is below mid-point of long term trend lines. Company is wel run and poised to leverage post pandemic growth. Has strong digital business snd decent food. I’ll take your bet in 25% dip and Predict slow decent stock growth. BTW peers all have elevated multiples too. This economic cycle will last at least deep into 2022.
That's why I'm in a line with 10 cars ahead of me at the drive thru.. sure no one goes there
quantsb profile picture
Dunkin was acquired at 23x EV/EBITDA, Sonic was acquired at 15x EV/EBITDA, down 25% would suggest EV/EBITDA of 13.3x... I think Peltz might have something to say...
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