Wendy's Company (The) Common Stock (WEN)

FairStock Score: 49/100 — MIXED

Key Financials

Strengths

• Generates $171 million in annual free cash flow (13.0% yield on market cap)
• High return on equity of 87.6% demonstrating efficient capital deployment
• Attractive 8.1% dividend yield providing steady income returns

Concerns

• Trades significantly above Graham Number ($3) with negative 101% margin of safety—limited downside protection
• High leverage at 35.31x debt-to-equity increases financial risk and interest expense burden
• Revenue declining at 5.5% year-over-year signals potential demand weakness or market share loss
• Altman Z-Score of 0.5 places it in the financial distress zone—elevated bankruptcy risk

AI Analysis

Wendy's Company (The) Common Stock is a micro-cap consumer cyclical company valued at $1.3 billion. The business generates $2.2 billion in annual revenue with a 1.2% net margin and $171 million in free cash flow. From a quality standpoint, Wendy's shows distressed Altman Z-Score of 0.5 warrants caution and extraordinary 88% return on equity. On valuation, the stock is deeply undervalued on a P/E basis at 8.2x, with trades far above its Graham Number ($3) with no margin of safety. Growth dynamics show revenue growing at -5.5% and profit growth of -44.3%. The 8.1% dividend yield adds an income component for patient holders. Our composite FairStock Score of 49/100 reflects mixed fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

The market underappreciates Wendy's's consistent 88% ROE at just 8x earnings—a re-rating toward sector peers could unlock 30-50% upside. With $171 million in annual free cash flow (13.0% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Elevated leverage at 35.3x D/E means rising interest rates or revenue weakness could strain debt covenants and force asset sales at distressed prices. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer