Warren Buffett attracts a lot of attention. As the world's third-richest person and most celebrated investor, thousands try to glean what they can from his thinking processes and track his investments.

While we can't know for sure whether Buffett is about to buy Wendy's/Arby's (NYSE: WEN) -- he hasn't specifically mentioned anything about it to me -- we can discover whether it's the sort of stock that might interest him. Answering that question could also inform whether it's a stock that should interest us.

In his most recent 10-K, Buffett lays out the qualities he looks for in an investment. In addition to adequate size, proven management, and a reasonable valuation, he demands:

  1. Consistent earnings power.
  2. Good returns on equity with limited or no debt.
  3. Management in place.
  4. Simple, non-techno mumbo jumbo businesses.

Does Wendy's/Arby's meet Buffett's standards?

1. Earnings power
Buffett is famous for betting on a sure thing. For that reason, he likes to see companies with demonstrated earnings stability.

Let's examine Wendy's/Arby's earnings and free cash flow history:

Source: Capital IQ, a division of Standard & Poor's. Free cash flow is adjusted based on author's calculations.

Over the past five years, Wendy's/Arby's earnings have been fairly volatile, but free cash flow has made a comeback in recent years.

2. Return on equity and debt
Return on equity is a great metric for measuring both management's effectiveness and the strength of a company's competitive advantage or disadvantage -- a classic Buffett consideration. When considering return on equity, it's important to make sure a company doesn't have an enormous debt burden, because that will skew your calculations and make the company look much more efficient than it actually is.

Since competitive strength is a comparison between peers, and various industries have different levels of profitability and require different levels of debt, it helps to use an industry context.

Company Debt-to-Equity Return on Equity (LTM) Return on Equity (5-year average)
Wendy's/Arby's Group 71% 0% (6%)
McDonald's (NYSE: MCD) 83% 35% 26%
Yum! Brands (NYSE: YUM) 193% 81% 122%
Panera Bread (Nasdaq: PNRA) 0% 19% 16%

Source: Capital IQ, a division of Standard & Poor's.

Wendy's/Arby's hasn't produced high returns on equity while employing limited debt.

3. Management
CEO Roland Smith has been at the job since 2007.

4. Business
The restaurant industry isn't particularly susceptible to wholesale technological disruption.

The Foolish conclusion
Regardless of whether Buffett would ever buy Wendy's/Arby's, we've learned that the company doesn't exhibit many of the characteristics of a quintessential Buffett investment: consistent earnings and high returns on equity with limited debt. However, it has been generating free cash flow, has tenured management, and operates in a straightforward industry.

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Ilan Moscovitz doesn't own shares of any companies mentioned. You can follow him on Twitter@TMFDada. The Motley Fool owns shares of Yum! Brands. Motley Fool newsletter services have recommended buying shares of McDonald's and Panera Bread. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.