Health-conscious individuals are far more common today than they were when major fast food chains started operating. This makes owning restaurants like McDonald’s Corporation (NYSE:MCD), The Wendy’s Company (NASDAQ:WEN) and Burger King Worldwide Inc (NYSE:BKW) a bit of a tricky game. These firms often have to pay closer attention to societal trends than most firms in order to secure their prosperity. In addition, business operations have to be tight as a shoelace so that the firms don’t trip up in the attempt to reign supreme. So which companies come out on top.
McDonald’s could be set for a drop
McDonald’s Corporation (NYSE:MCD) share price has risen about 11% in the last year; however, shares are 4% lower from mid-April. Return on assets hasn’t been great over the last several years, and this has investors skating on thin ice. The indicator is calculated by using the net income from a specific operating period and dividing it by the average total assets the company owns. In McDonald’s Corporation (NYSE:MCD)case, the company has nearly 70% of its assets consumed by equipment and property. That is a considerable amount, and is due largely to the fact that there are about 34,000 McDonald’s restaurants throughout the world.
In looking at McDonald’s Corporation (NYSE:MCD) return on assets, we can see that the firm is accumulating just over a 16% return. Also, over the last 5 years, it becomes clear that the firm’s share price rises as the return on assets rise.
Now, the company has a declining return on assets, and profit margins are about as low as they‘ve been over the last four years. Even though the return on assets is steadily falling, the share price has risen, which indicates that over a longer-term period, the price will fall. That is if history repeats itself, which it usually does.
Wendy’s is improving its look
The Wendy’s Company (NASDAQ:WEN) has been making a harder drive recently to ramp up profits. For example, the firm has added options such as the “Image Activation,” (low-cost remodeling project) and “Right Price, Right Size,” (value menu) to its offerings. Also, the firm is sure to attract new customers with the Pretzel Bacon Cheeseburger. While Wendy’s has historically been near the top of the class in the fast-food industry, it has experienced a decline in sales due to increased competition. But these new initiatives could put the company, and shareholders, on top.