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McDonald’s Corporation (MCD), Burger King Worldwide Inc (BKW), The Wendy’s Company (WEN): Why This Burger Stock is a Must-Buy

Pretzel Bacon Cheeseburger

After product testing in Cleveland, Miami, and Sacramento earlier this year, Wendy’s claimed that the burger outperformed any other promotional hamburger in recent Wendy’s history. The new burger costs $4.99 for a single and $5.99 for a double. Analysts expect that the new burger could increase same-store sales by 3%, or even more, in the third quarter.

Valuation

Wendy’s also underwent debt refinancing in the middle of 2013, which will save around $25 million in interest expenses per year. It has the lowest amount of debt compared to its competitors. Its enterprise value to EBITDA ratio shows that it has the best growth opportunity of the three companies. The price to book value ratio is also lower than that of the other two burger giants (price to book value ratios of less than one offer attractive investment opportunities). All these ratios indicate that Wendy’s is still an undervalued stock.

Company Dividend yield Price/Sales ratio Debt to Equity ratio Enterprise value to EBITDA Price to Book Value ratio PEG ratio
The Wendy’s 2.8% 1.17 0.7 8.6 1.48 1.1
McDonald’s 3.1% 3.58 1 10.4 6.5 1.7
Burger King 1.28% 4.86 2.8 11.6 5.32 1.1

Conclusion

With continuous momentum in its reimaging program, success with the pretzel burger, and cheap stock valuation, Wendy’s has excellent potential for long-term growth. If the remaining reimaging restaurants experience a strong boost in sales, The Wendy’s Company (NASDAQ:WEN) stock will see an upside. I recommend a strong buy for Wendy’s.

McDonald’s Corporation (NYSE:MCD) has been a consistent performer suitable for low-risk seeking investors. I suggest holding the stock.

As far as Burger King Worldwide Inc (NYSE:BKW) is concerned,  its investors are gambling on its transformation toward the franchisee model. I recommend holding this stock as well.

The article Why This Burger Stock is a Must-Buy originally appeared on Fool.com and is written by Ranu Devi.

Ranu Devi has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald’s. The Motley Fool owns shares of McDonald’s.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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