NEW YORK ( TheStreet) -- Wendy's Arby's Group Inc (NYSE: WEN) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and poor profit margins. Highlights from the ratings report include:
- The gross profit margin for WENDY'S CO is rather low; currently it is at 22.20%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -0.20% is significantly below that of the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, WENDY'S CO's return on equity significantly trails that of both the industry average and the S&P 500.
- WENDY'S CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WENDY'S CO swung to a loss, reporting -$0.01 versus $0.01 in the prior year. This year, the market expects an improvement in earnings ($0.14 versus -$0.01).
- Net operating cash flow has significantly increased by 51.70% to $53.46 million when compared to the same quarter last year. In addition, WENDY'S CO has also vastly surpassed the industry average cash flow growth rate of -83.82%.
- Compared to its price level of one year ago, WEN is up 13.95% to its most recent closing price of 4.90. Looking ahead, our view is that this company's fundamentals should not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.