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Wendy’s Stock Falls after Mizuho Downgrade

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Stock performance

The Mizuho downgrade appears to have led a fall in Wendy’s (WEN) stock price. Today, at 10:30 AM EST, the company was trading ~1.2% lower from its previous day’s closing price. The weakness in the broader equity market with the S&P 500 Index down by ~0.3% also appears to have contributed to the fall in the company’s stock price.

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Year-to-date performance

After losing 4.9% of its stock value in 2018, Wendy’s has had a positive start to 2019. YTD, the company has returned 6.0% as of March 19. During the same period, Wendy’s peers McDonald’s (MCD), Jack in the Box (JACK), and Restaurant Brands International (QSR) have returned 3.1%, 0.3%, and 21.8%, respectively. The Consumer Discretionary Select Sector SPDR ETF (XLY), which invests 8.1% of its holdings in restaurant and travel companies, has returned 13.4% YTD.

Valuation multiple

As of March 19, Wendy’s was trading at 26.9 times analysts’ EPS expectation of $0.62 in 2019, and 21.6 times analysts’ EPS of $0.77 in 2020 with its EPS expected to rise by 4.3% in 2019 and 24.4% in 2020.

Also, on the same day, Wendy’s was trading at a forward PE multiple of 25.6x, while peers McDonald’s, Jack in the Box, and Restaurant Brands International were trading at a forward PE multiple of 22.4x, 16.2x, and 22.4x, respectively.

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