Perform analysis and valuing for Wendy company
Perform analysis and valuing for Wendy company. Wendy’s Co. is the third largest quick service restaurant company in the hamburger sandwich segment. It provides hamburgers and related products such as chicken breast sandwiches, nuggets, chili, baked potatoes, French fries, freshly prepared salads, soft drinks, milk, coffee, frosty deserts and kids meals. The company was founded by R. David Thomas on November 15, 1969 and is headquartered in Dublin, OH. 1 The Wendy’s Company is the parent Company of Wendy’s Restaurants LLC. As of December 2017, the Wendy’s restaurant system is comprised of 6,130 restaurants, of which 337 were owned and operated by the Company with the remainder franchised. 2
Instructions
Before valuing WEN, it is important to understand who the company is, what and where it sells, strategic plans for growth, successes/ failures and historical financial performance. This should be written up as an analysis of the Company and not a Q&A assignment. The questions are there to give you guidance not for a specific outline. Analyze the following (include explanations of cause and effect – always assessing “why” something has occurred):
- In the first section, describe the Company’s strategy in the last few years, including its business model approach for growth.
Important: In terms of business model, please research if the Wendy’s is a company owned or franchise type.
a. Include your thoughts on whether WEN has sustainable competitive advantages and if so what are they doing to continue to allow these advantages to persist going forward.
b. Is their growth organic or acquired – specifically explain what happened? Are most of their sales domestic (US) or foreign- has this shifted over the last five years?
c. What is happening to their industry? - In the second section, provide a financial overview of the Company’s historical results (all calculations shown in Excel) and brief commentary by business segment (by product type and geographic area). Focus on 2013-2017 (which includes TTM if available).
a. Analyze the performance over the last five years including an assessment of revenue, operating profit, FCF, and earnings growth, margins, returns and economic profit. Assess their performance individually and relative to their industry. Make sure to connect your overall comments on the success/failure of their strategic plan to the numbers you’ve calculated. Look at financial performance of segments as well.
b. How is the company financed? Has their capital structure changed over the last several years and if so, how? Concerns about leverage?
c. Is WEN sensitive to the economy based on your calculations over this time frame?
- Using all the information, as well as the comparative ratios (define the key competitors and download relevant ratios), explain the stock performance of WEN versus its competition, the industry and the market.
a. Appendix: What adjustments, if any, would you make to WEN’s EBIT, to correctly assess historical growth? Explain your answer. - Given all the above, what do you see as the top three risks to WEN future success. This can include macro as well as company specific risks.
- NOTE: Your calculations on excel will provide information for the above questions. If you choose to make any adjustments to the data given, insert a note on the excel sheet (ratios tab) to reflect these adjustments. For the written analysis, do not copy your answers form the SBUX annual report or 10k. Most of the report should be in your own words, but if you use any quotes, make sure to footnote appropriately. The format of the written work must be written as an analyst evaluation of the Company (Q&A, even w/o the numbers there, will result in a loss of points). No more than 3-4 pages should be written double spaced with one inch margins on all sides. I will NOT read past 4 pages and
do not adjust font or margins.
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