Analyzing Wendy’s (NASDAQ:WEN) and Restaurant Brands International (NYSE:QSR)

Restaurant Brands International (NYSE:QSR) and Wendy’s (NASDAQ:WEN) are both retail/wholesale companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, institutional ownership, analyst recommendations, risk and profitability.

Earnings and Valuation

This table compares Restaurant Brands International and Wendy’s”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Restaurant Brands International	$8.41 billion	2.67	$1.02 billion	$2.64	25.95
Wendy’s	$2.25 billion	0.81	$194.36 million	$0.96	9.95

Restaurant Brands International has higher revenue and earnings than Wendy’s. Wendy’s is trading at a lower price-to-earnings ratio than Restaurant Brands International, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

82.3% of Restaurant Brands International shares are owned by institutional investors. Comparatively, 86.0% of Wendy’s shares are owned by institutional investors. 1.3% of Restaurant Brands International shares are owned by insiders. Comparatively, 17.0% of Wendy’s shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current ratings and target prices for Restaurant Brands International and Wendy’s, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Restaurant Brands International	1	13	11	0	2.40
Wendy’s	4	13	5	1	2.13

Restaurant Brands International currently has a consensus target price of $75.04, suggesting a potential upside of 9.53%. Wendy’s has a consensus target price of $12.66, suggesting a potential upside of 32.54%. Given Wendy’s’ higher possible upside, analysts clearly believe Wendy’s is more favorable than Restaurant Brands International.

Volatility & Risk

Restaurant Brands International has a beta of 0.65, indicating that its stock price is 35% less volatile than the S&P 500. Comparatively, Wendy’s has a beta of 0.38, indicating that its stock price is 62% less volatile than the S&P 500.

Profitability

This table compares Restaurant Brands International and Wendy’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Restaurant Brands International	9.43%	29.54%	5.83%
Wendy’s	8.63%	103.07%	3.94%

Dividends

Restaurant Brands International pays an annual dividend of $2.48 per share and has a dividend yield of 3.6%. Wendy’s pays an annual dividend of $0.56 per share and has a dividend yield of 5.9%. Restaurant Brands International pays out 93.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Wendy’s pays out 58.3% of its earnings in the form of a dividend. Restaurant Brands International has increased its dividend for 10 consecutive years. Wendy’s is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Restaurant Brands International beats Wendy’s on 11 of the 18 factors compared between the two stocks.

About Restaurant Brands International

Restaurant Brands International Inc. operates as a quick-service restaurant company in Canada, the United States, and internationally. It operates through four segments: Tim Hortons (TH), Burger King (BK), Popeyes Louisiana Kitchen (PLK), and Firehouse Subs (FHS). The company owns and franchises TH chain of donut/coffee/tea restaurants that offer blend coffee, tea, and espresso-based hot and cold specialty drinks; and fresh baked goods, including donuts, Timbits, bagels, muffins, cookies and pastries, grilled paninis, classic sandwiches, wraps, soups, and other food products. It is also involved in owning and franchising BK, a fast-food hamburger restaurant chain, which offers flame-grilled hamburgers, chicken and other specialty sandwiches, French fries, soft drinks, and other food items; and PLK quick service restaurants that provide Louisiana-style fried chicken, chicken tenders, fried shrimp and other seafood, red beans and rice, and other regional items. In addition, the company owns and franchises FHS quick service restaurants that offer meats and cheese, chopped salads, chili and soups, signature and other sides, soft drinks, and local specialties. The company was founded in 1954 and is headquartered in Toronto, Canada.

About Wendy’s

The Wendy’s Co. engages in operating, developing, and franchising a system of quick-service restaurants. It operates through the following segments: Wendy’s U.S., Wendy’s International, and Global Real Estate and Development. The Wendy’s U.S. segment includes the operation and franchising of Wendy’s restaurants in the U.S. The Wendy’s International segment is involved in the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. The Global Real Estate and Development segment focuses on real estate activity for owned sites and sites leased from third parties. The company was founded by R. David Thomas on November 15, 1969 and is headquartered in Dublin, OH.