3 Reasons Wendy's Might Be Your Best Choice in Fast-Food Stockshttp://www.fool.com/investing/general/2013/11/19/3-reasons-wendys-might-be-your-best-choice-in-fast.aspx Brian Nichols
November 19, 2013
Fast-food restaurants have stood the test of time, proving that no matter the economic environment, they remain noncyclical in nature. And while many might prove to be good long-term investments, there are three reasons that Wendy's (NASDAQ: WEN) is better than its peers McDonald's (NYSE: MCD) and Burger King Worldwide (NYSE: BKW).
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Now, Wendy's is doing the same with its pretzel burger, and neither McDonald's nor Burger King appears to have such a product. Wendy's pretzel burger is its best-selling new product in more than a decade, and this newfound growth driver should give investors a reason to be optimistic, as Wendy's rolls its pretzel concept on to other sandwiches.
In Wendy's last quarter, the company saw same-store-sales growth of 3.2%, suggesting the holiday season could be strong for the restaurant chain.
When assessing industries such as retail or restaurants, same-store sales are often the best metric of company growth and success. These are companies that can rapidly expand to increase revenue, but with expansion comes higher costs, and same-store-sales growth indicates that more consumers are buying more food per store. This ultimately drives margin growth.
In comparison, McDonald's has 0% to 1% same-store growth, and Burger King is even worse, barely breaking even. Hence, Wendy's is growing the fastest.
Wendy's trades at 30 times next year's earnings, which might appear pricey at first glance. Yet a closer look reveals that Wendy's trades at just 1.35 times sales and has an operating margin of 7.9%. In comparison, McDonald's trades at 3.5 times sales and Burg