As of December 29, 2017, analysts were expecting Wendy’s (WEN) stock to reach $16.58 in the next 12 months, which represents a potential return of 1.0% based on its current stock price.
On December 21, 2017, Royal Bank of Canada raised its target price from $16 to $18, and on December 20, 2017, Wedbush upgraded the stock from “neutral” to “outperform” and raised its target price from $16 to $20. Nick Setyan of Wedbush expects Wendy’s SSSG (same-store sales growth) to reach 2.5% in 4Q17, driven by restaurant remodeling and promotional initiatives. Peers’ target prices and return potential are as follows:
- McDonald’s (MCD): Target price of $179.79, which represents a 4.5% rise from its current stock price
- Jack in the Box (JACK): Target price of $109, which represents an 11.1% rise from its current stock price
- Restaurant Brands International (QSR): Target price of $72, which represents a 17.1% rise from its current stock price
Of the 21 analysts following Wendy’s, 38.1% recommend “buy,” 57.1% recommend “hold,” and 4.8% recommend “sell.” Whereas Wendy’s is currently trading below analysts’ target price, the stock is not an automatic “buy.” Investors are advised to analyze various parameters, such as those discussed in this series, before making any investment decisions.
For our analysis, we’ve used the forward PE (price-to-earnings) multiple due to its high visibility in Wendy’s earnings. On December 29, 2017, Wendy’s was trading at a forward PE multiple of 30.2x. That day, peers McDonald’s (MCD), Jack in the Box (JACK), and Restaurant Brands International (QSR) were trading at forward PE multiples of 24.6x, 20.4x, and 23.5x, respectively.