Wendy’s (WEN:NAS) Fundamental Valuation Report

Wendy’s (WEN:NAS) Fundamental Valuation Report

Fundamental Valuation Report


Consumer Cyclical:Restaurants

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$23.22 (USD) 05/28/2021

Weighted Valuation
$25.04 (USD)

Overall Rating
Undervalued by 7.8%

Valuation Models Discounted Cash Flow: $25.31 (USD)
Multiples: $24.63 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Undervalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation
According to Analyst consensus at $25.83 this stock is Undervalued

Company Overview (WEN:NAS USD)

Price 23.22
Range 22.85 – 23.25
52 week 19.38 – 24.71
Open 22.95
Vol / Avg. 1.69M/3.2M
Mkt cap 5.14B
P/E 36.28
Div/yield 0.29/0.01
EPS 0.52
Shares 221.36M
Beta 0.95

Company Description

The Wendy’s Co is a quick-service restaurant franchisor, operating restaurants under the brand name Wendy’s. The company operates in three segments namely Wendy’s U.S., Wendy’s International, and Global Real Estate & Development. Wendy’s are known for its hamburger sandwiches in the United States and Canada. Other than sandwiches, their menu also offers chicken nuggets, chilli, French fries, baked potatoes, freshly prepared salads, soft drinks, Frosty desserts, and kids’ meals. Wendy’s are also present in various other foreign countries and U.S. territories. Revenues are generated from sales at own restaurants as well as from franchise-related royalties, rents, and fees from Wendy’s. The majority of the revenue is generated from Wendy’s U.S. segment.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for WEN:NAS

Using a discounted cash flow model we generated an intrinsic value of $25.31 (USD) for WEN:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

WEN:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $25.31 1% 5% 1% 5%
WACC (or Ke) 5.48 $34.60 $19.12
Terminal Growth Rate 0.50 $19.69 $33.74
Tax Rate 0.23 $27.65 $22.97
Cash Flow 528,328,500 $23.50 $27.11
Capital Expenditures 0 $25.31 $25.31
Long Term Debt 2,515,822,000 $25.88 $24.74

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $51.72 (USD) for WEN:NAS. We also generated a valuation of $45.98 (USD) using other metrics and comparables.
The comparable companies were Cannae Holdings (CNNE:NYS), Yum China Holdings (YUMC:NYS), Wingstop (WING:NAS), Shake Shack (SHAK:NYS) and Dave & Buster’s Enter (PLAY:NAS).

Company WEN:NAS End Date Value
Earnings/Share $0.64 (USD)
Book Value/Share $2.35 (USD)
Sales/Share $7.86 (USD)
Cash Flow/Share $1.71 (USD)
EBITDA/Share $1.90 (USD)
Price Based on Comps Adjustment Factor (%)
$39.02 (USD) 98.9
$16.53 (USD) -45.9
$56.21 (USD) -50.8
$84.48 (USD) -1.1
$64.79 (USD) -7.8
36.28 PE Ratio 60.97 3.56 29.16 150.19 0.00 0.00
9.87 PB Ratio 7.03 0.93 4.46 0.00 9.54 13.18
2.96 PS Ratio 7.15 5.46 3.09 16.12 6.89 4.22
13.57 PCF Ratio 58.82 0.00 20.22 63.67 92.56 0.00
18.16 EV to EBITDA 34.12 2.97 18.55 80.84 0.00 0.00


Using a multiples approach we generated a valuation of  $24.63 (USD) for WEN:NAS

Company WEN:NAS End Date Value
Earnings/Share $0.64 (USD)
Book Value/Share $2.35 (USD)
Sales/Share $7.86 (USD)
Cash Flow/Share $1.71 (USD)
EBITDA/Share $1.90 (USD)
Price Based on Comps Adjustment Factor
$18.93 (USD) 0
$18.01 (USD) 0
$23.00 (USD) 0
$31.97 (USD) 0
$31.24 (USD) 0
Ratios Ratio Average
PE Ratio 29.57
PB Ratio 7.66
PS Ratio 2.93
PCF Ratio 18.69
EV to EBITDA 16.45

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  WEN:NAS for the last 10 years was  6.24

We ran the Adjusted Book Value for  WEN:NAS and generated a book value of  $2.32 (USD)
By multiplying these we get an adjusted valuation of  $14.48 (USD)

Analyst Data

In the Stockcalc database there are 6 analysts that provide a valuation for WEN:NAS. The 6 analysts have a concensus valuation for WEN:NAS for 2021 of $25.83 (USD).

WEN:NAS Wendy’s

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
3 5 0 3.7500 Outperform 2021-5-27

Current Price: 23.22 USD

Analyst Consensus
USD Millions 2021 2022 2023
Mean EPS 0.72 0.82 1.00
# EPS Analysts 6 6 3
Mean Revenue 1,844.90 1,893.10 1,991.60
# Revenue Analysts 4 4 3
Mean Target Price 25.83
Mean Cash Flow 1.41 1.53 1.74
Mean EBITDA 453.80 483.00 525.70
Mean Net Income 165.50 186.70 213.60
Mean Debt Outstanding 1,816.30 1,847.80 1,900.20
Mean Tax Rate 24.90 25.00 25.00
Mean Growth Rate 9.00
Mean Capital Expenditure 82.40 80.00 80.00

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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