Saturday, October 1, 2011

Research: WEN Wendy's burgers taste better than its stock

I love Wendy's, more than McDonalds and Burger King, their burgers I mean.

Unfortunately, it's just not a good company. Shareholder equity shows this is a break even business, which makes enough to just cover expenses and continue running, but not leave much for the shareholders. They have a very low return on assets and equity, likely due to their profits going to pay off debt. It's not in any financial trouble, but with only 14m in earnings last year and 2bn in shareholder equity, don't expect a reasonable rate of return any time soon.

It's also got a large amount of debt compared to its operating cash flow, requiring at around 8 years to pay off assuming all cash flow goes towards debt, a theoretical situation which will not happen in this reality.

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