Is Wendy's Share Slide Creating an Opportunity for Long Term Investors in 2025?

• If you have been wondering whether Wendy's is a bargain or a value trap at today's price, this breakdown will walk you through what the numbers are really saying about the stock.
• The share price has inched up 2.3% over the last week, but that small bounce sits against a much steeper backdrop, with the stock still down 48.1% over the past year and 54.0% over five years.
• Much of this weak performance has been framed around shifting sentiment toward fast food, with investors debating how changing consumer habits and cost pressures will affect mid tier restaurant chains. At the same time, ongoing initiatives around menu innovation, digital ordering and franchise growth have kept Wendy's firmly in the conversation as a potential turnaround story.
• Right now, Wendy's scores a 4 out of 6 on our valuation checks. This means several metrics suggest it might be undervalued, but not without some caveats. Next, we will unpack those different valuation approaches one by one, then finish by looking at a more holistic way to judge whether the current price really makes sense.

Find out why Wendy's's -48.1% return over the last year is lagging behind its peers.

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

A Discounted Cash Flow model estimates what a business is worth today by projecting its future cash flows and discounting them back to the present. For Wendy's, this uses a 2 stage Free Cash Flow to Equity approach based on its expected ability to generate cash for shareholders.

Wendy's last twelve months Free Cash Flow stands at about $250.6 Million. Analysts provide explicit forecasts for the next few years, including around $220 Million of Free Cash Flow by 2027, and Simply Wall St extrapolates these trends further out to build a 10 year cash flow trajectory. Beyond that period, growth is assumed to gradually slow, which is typical for mature restaurant chains.

After discounting all those projected cash flows back to today, the model arrives at an intrinsic value of roughly $10.39 per share. Compared with the current market price, this implies the stock is trading at a 19.6% discount. In this model, investors are pricing Wendy's below the value suggested by its projected cash generation potential.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Wendy's is undervalued by 19.6%. Track this in your watchlist or portfolio, or discover 915 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

For profitable companies like Wendy's, the price to earnings (P/E) ratio is a straightforward way to gauge how much investors are willing to pay for each dollar of earnings. A higher P/E typically reflects stronger growth expectations or lower perceived risk, while a lower P/E can signal slower growth, higher risk, or a potential bargain.

Wendy's currently trades at about 8.54x earnings. That is well below both the Hospitality industry average of around 24.08x and the broader peer group average of roughly 21.23x, suggesting the market is valuing Wendy's earnings at a steep discount to similar businesses. On the surface, that looks attractive, but simple peer comparisons can miss important differences in growth prospects, profitability and risk.

Simply Wall St's Fair Ratio tackles this by estimating what Wendy's P/E should be, given its earnings growth outlook, margins, industry, market cap and risk profile. For Wendy's, the Fair Ratio is 13.80x, notably above the current 8.54x. That gap implies the market is pricing the company below what these fundamentals would justify, and this points to potential upside if sentiment normalizes.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1460 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 us introduce you to Narratives, a simple framework on Simply Wall St's Community page that lets you attach a clear story to your assumptions about Wendy's future revenue, earnings, margins and fair value. You can then compare that fair value to the current price to consider whether to buy, hold or sell. The platform continuously updates those Narratives as new news or earnings arrive. One investor might build a bullish Wendy's Narrative around accelerating digital orders, menu innovation and international expansion that points to a fair value closer to the higher analyst target of $18.50. Another could construct a more cautious Narrative that focuses on weak same store sales, cost inflation and tougher competition and lands nearer the low end of $10.00, with both perspectives transparently linked back to the forecasts and valuation logic behind them.

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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