A Look At Wendy’s (WEN) Valuation As Revenue And Earnings Weaken On Shifting Consumer Spending

Recent attention on Wendy's (WEN) has centered on declining revenue and net income, as higher fast food prices push more consumers toward grocery shopping instead and weigh on sentiment around the stock.

See our latest analysis for Wendy's.

The latest share price of $8.22 comes after a 1-day share price return of a 2.61% decline and a 90-day share price return of a 6.91% decline. The 1-year total shareholder return of a 42.58% decline and 5-year total shareholder return of a 50.85% decline underline how sentiment around Wendy's has weakened over time as investors reassess the risks tied to softer revenue and net income.

If price pressure on fast food has you rethinking your watchlist, this could be a good moment to widen your search with fast growing stocks with high insider ownership.

With Wendy's trading at US$8.22 and screening on some metrics as cheaper than certain estimates of intrinsic value, the key question is whether the stock is genuinely undervalued or whether the market has already priced in its future growth potential.

Most Popular Narrative Narrative: 19.8% Undervalued

With Wendy's last closing at US$8.22 against a narrative fair value of US$10.25, the narrative frames the stock as meaningfully cheaper than its modeled future earnings power.

The analyst price target for Wendy's has been modestly reduced from $10.38 to $10.25 per share, as analysts factor in a wave of Street target cuts tied to softer same store sales expectations, rising cost pressures, and a tougher competitive backdrop, despite pockets of operational outperformance.

Read the complete narrative.

Curious how modest growth assumptions, tweaked profit margins, and a slightly lower future P/E still add up to upside from here? The full narrative lays out the earnings path, the margin profile, and the valuation multiple that underpin that US$10.25 fair value.

Result: Fair Value of $10.25 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that upside story could unravel if consumer demand keeps softening or if rising commodity and wage costs squeeze margins more than analysts currently assume.

Find out about the key risks to this Wendy's narrative.

Build Your Own Wendy's Narrative

If you interpret the numbers differently or simply prefer to test your own assumptions, you can create a custom view in just a few minutes with Do it your way.

A great starting point for your Wendy's research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

Looking for more investment ideas?

If Wendy's has you reassessing your watchlist, treat this as a prompt to broaden your research and line up a few fresh contenders worth your attention.

• Spot potential value opportunities early by scanning these 884 undervalued stocks based on cash flows that may trade below what their cash flows imply.
• Position yourself for trends in automation and data by checking out these 26 AI penny stocks shaping the future of intelligent computing.
• Add diversification with income in mind by reviewing these 12 dividend stocks with yields > 3% that already offer yields above 3%.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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