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Strategies & Market Trends : Value Investing

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To: E_K_S who wrote (78275)	10/16/2025 9:15:21 AM
From: Sean Collett	3 Recommendations Recommended By E_K_S JohnyP petal Read Replies (2) of 78451

Speaking of fast food one that is hitting my radar is The Wendy's Company (WEN) Stock closed yesterday at $8.87/s and is a bit above the 52-week low of $8.55/s with the 52-week high at $20.60/s. Fast food and restaurants in general are starting to be hurt from residual inflation impacts as food costs are starting to make them pricey options and I also think choice saturation is a big driver too - there are just way too many places to eat today. I remember back in 2018 driving by an old mall area where I worked and being amazed at the fact that what use to be a RadioShack or some other physical retailer was now some quick service restaurant (QSR). So much choice and all competing against each other. These booms happen all the time though. Auto company booms in the 1920's, cable channel boom in 80's-90's, QSR boom.....and AI. Eventually there will be a select group of winners and I think WEN has its place. I think WEN has a pretty strong brand and at $8.87/s it does look attractive. Out of so many choices that have come into the market the past 10-15 years I think WEN is one that will last through it all. Their spicy chicken sandwich is the best out of any chain out there IMO :). With that WEN has been able to serve stable rev as they navigate all this. They recently implemented an AI window so you give your order to a PC and it processes everything. From a customer experience side it was fine and actually a bit smoother and from an operator side this will eventually deliver a clear operating savings. They are buying back shares and pay a dividend. They have this as part of their 2025 investor day capital strategy: Their target dividend payout ratio is 50-60% of adjusted earnings. For share repurchases they are targeting up to $200M in 2025. They have about $2,752.71M in debt with $865.19M due between 2026 and 2029 and then the rest is between 2031-2032. This does put leverage ratio a bit higher as I calculate it around 5x. Organic cash flow (before debt borrowing/repayment) is positive and has been for many years and their target by 2028 is to be at 3.5x. CAPEX spend for the next 3 years is estimated to be around $115M annually. If you look at their DEF 14A management is compensated on adjusted EBITDA at 50% (LOL), global same-store sales growth at 30%, but FCF has them compensated at 20%. I tend to like when cash generation is how the leadership team is compensated, doesn't always mean it will be gold, but does help if their interests align with shareholders. If I use a multiple range of 10-12x I have a value of WEN around $14.32-$19.99/s which gives some upside potential of 61%-125% from the $8.87/s price. WEN also projects EBITDA around $650-700M by 2028 and if we go with the low end EBITDA and assume 10-12x multiple then share price could be around $20.11-$27.02/s. Chart is not giving a clear entry yet so I may just go in with a small position to start and then size once I get the technical clearing to enter. Thoughts on WEN? Happy investing, Sean

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