Does Wendy’s 52% Share Price Drop Signal an Opportunity in 2025?

• Ever wondered if Wendy's stock is a hidden bargain or a value trap? Let's dig into what the numbers and recent developments suggest about its current price.
• Volatility has been the name of the game lately, with the share price dropping 6.9% over the last 30 days and down a striking 52.5% over the past year.
• Industry headlines are circling Wendy's, from discussions around shifting consumer trends to competitive menu innovations that are shaking up the quick-service space. These factors have played a role in pushing the stock lower, while also raising new questions about the outlook for fast-food brands in 2024.
• When we look at the official valuation checklist, Wendy's scores 5 out of 6 on our criteria for undervaluation. In the next sections, we will compare the major valuation methods analysts use, and introduce a powerful approach that might help you see Wendy’s value in a whole new light.

Find out why Wendy's's -52.5% return over the last year is lagging behind its peers.

Approach 1: Wendy's Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's true value by projecting its future cash flows and then discounting them back to what they are worth today. This approach helps investors understand what a business is truly worth, beyond just its market price.

For Wendy's, the latest available Free Cash Flow (FCF) stands at $263.5 million. While analysts provide direct estimates for the next few years, projections beyond that are based on reasoned extrapolations. According to current projections, Wendy's FCF for 2027 is expected to be $253 million. Looking out ten years, FCF is estimated to gradually climb, reaching approximately $282.5 million by 2035.

By discounting these future cash flows to the present, the DCF model calculates an intrinsic share value of $12.45. Given the current share price, this analysis suggests the stock trades at a 28.6% discount to its estimated fair value. This means the DCF model points to Wendy's being significantly undervalued at today’s prices.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Wendy's is undervalued by 28.6%. Track this in your watchlist or portfolio, or discover 840 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Wendy's.

Approach 2: Wendy's Price vs Earnings (P/E Ratio)

The Price-to-Earnings (P/E) ratio is a popular tool for valuing profitable companies like Wendy’s, because it measures how much investors are willing to pay today for each dollar of current earnings. For companies consistently generating profits, the P/E ratio is a straightforward snapshot of market expectations and profitability.

However, the “right” P/E multiple varies from company to company. Growth prospects, risk profile, and industry trends all influence what counts as a fair value. Fast-growing, less risky companies tend to command higher P/E ratios, while slower-growing or riskier firms typically trade at lower multiples.

Wendy’s currently trades at a P/E ratio of 8.8x. That is notably below both its peer average of 18.2x and the wider hospitality industry average of 23.4x. Instead of focusing solely on those benchmarks, Simply Wall St’s proprietary “Fair Ratio” provides a more tailored perspective. By factoring in Wendy’s specific earnings growth, industry influences, profit margins, market capitalization, and risk profile, the Fair Ratio for Wendy’s is set at 15.7x. This approach offers a more holistic view than simply comparing with peers, ensuring you are measuring the stock against what is truly a fair multiple given all its unique characteristics.

With Wendy’s P/E ratio well below its Fair Ratio, this suggests the shares are undervalued based on current earnings and business outlook.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1410 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Wendy's Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply your story or perspective about a company, backed by your assumptions and outlook on its future revenue, earnings, and margins. This approach connects the company’s story, from digital innovation and international expansion to competitive and economic risks, to your own financial forecasts and ultimately to what you believe is a fair value for the stock.

On Simply Wall St’s Community page, Narratives make this process accessible and actionable for millions of investors. You can quickly see the link between your investment story, the resulting fair value, and today’s share price. This helps you decide when a stock looks attractive or overpriced. Narratives update dynamically as new information, like news or earnings releases, comes in, so your analysis stays current.

For example, with Wendy's, one user might believe margin growth and international momentum deserve a fair value of $18.50 per share, while another may worry about shifting consumer preferences and assign a value as low as $10.00. Both are valid Narratives. It is about backing your view with numbers and clarity, so you can cut through the noise and invest with real conviction.

Do you think there's more to the story for Wendy's? Head over to our Community to see what others are saying!

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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