Rating Change #2
(WEN - Get Report)
has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
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Highlights from the ratings report include:
- WEN's revenue growth has slightly outpaced the industry average of 2.7%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 562.3% when compared to the same quarter one year prior, rising from $3.98 million to $26.39 million.
- Net operating cash flow has slightly increased to $65.78 million or 1.81% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.23%.
- WEN's debt-to-equity ratio of 0.73 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that WEN's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.79 is high and demonstrates strong liquidity.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
The Wendy's Company, through its subsidiaries, operates and franchises Wendy's quick service restaurants. The company engages in operating, developing, and franchising a system of distinctive quick-service restaurants in North America and internationally. The company has a P/E ratio of 272.5, above the S&P 500 P/E ratio of 17.7. Wendy's has a market cap of $2.14 billion and is part of the services sector and leisure industry. Shares are up 16.8% year to date as of the close of trading on Thursday.
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