Can Wendy’s continue to compete
On paper The Wendy’s Co (NASDAQ:WEN) seems to be the most attractively priced of the three. The company currently trades at 26 time’s forward earnings with a price/book of 1.19 and price/sales 0.93 well below its competitors (See paragraphs above). The Wendy’s Co (NASDAQ:WEN) saw a 1% quarter-over-quarter increase in same-store sales for the first quarter (Q1) 2013, outperforming the same-store sales decrease of roughly 1% by McDonald’s and the same-store sales decrease of 2% by Burger King. Wendy’s also raised its earnings guidance for 2013 from $.20 to $.22 a share.
The new dividend of $0.16 demonstrates that The Wendy’s Co (NASDAQ:WEN) management is dedicated to returning value to shareholders. However, the elevated payout ratio of 72% does not leave much margin of error if earnings are not as expected.
Wendy’s also has a much more limited exposure to international markets than Burger King and McDonald’s. The company has just 374 franchised restaurants in 26 countries and territories outside of North America. Management is dedicated to growing abroad with expansion operations under way in countries like Singapore and Japan. The Wendy’s Co (NASDAQ:WEN) is expecting growth of over 15% annually over the next five years. With a PEG ratio of 1.94 it appears that Wendy’s is valued relatively fairly, to its long term growth rate.
Wrap up
The answer is yes, there is long term value in each of these three fast food companies. Companies in this industry, the three above especially, have shown a fantastic ability to not only present value to their customers, but to continuously tweak their menus to meet an ever-changing consumer appetite.
Burger King Worldwide Inc (NYSE:BKW) and The Wendy’s Co (NASDAQ:WEN) are slightly speculative. The companies are both completing massive brand re-imaging programs and looking to increase their international exposure. These two companies could prove to valuable long term bets if management can remain committed to their new images and can continue to make increasing shareholder value a top priority.
McDonald’s Corporation (NYSE:MCD), on the other hand, is the true leader. The company boasts a global operation coupled with an iconic brand image and a history of stellar business operations. McDonald’s is a safe blue chip with a great yield you can hold for years to come.
The article Is There Any Long Term Value in These 3 Fast Food Giants originally appeared on Fool.com and is written by Daniel Paterson.
Daniel Paterson has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide (NYSE:BKW) and McDonald’s. The Motley Fool owns shares of McDonald’s. Daniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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