I believe Wendy’s $WEN ( ▼ 2.16% ) stock price is 38% below its true value. I bought the stock at $6.79 because I think the company is worth ~$11.

Wendy’s Company was started by Dave Thomas in 1969 in Columbus, Ohio. Today they have 7,251 restaurants in 38 countries and territories.

Wendy’s is the 2nd largest burger chain in America with U.S. systemwide sales of $11.9 billion. They are behind McDonald’s, which has $55 billion U.S. systemwide sales.

Wendy’s Company does not collect the entire $11.9 billion since 94% of their restaurants are owned by franchisees.

Their revenue comes from:

Wendy’s stock price has declined 70% over the last 5 years.

Price Hikes: Wendy’s aggressively raised prices to protect their margins against rising operating costs. It’s reported that Wendy’s raised their prices 55% between 2014 and 2026, while inflation was only 31%. They were no longer viewed as offering value.

Their Q1 2026 comparable sales fell 6.8% due to a decline in traffic.

I believe Wendy’s lack of an experienced management team and board also caused problems for them.

Brand

Wendy’s is a recognized brand that has fallen on tough times. Being the 2nd largest burger business in America helps keep customers coming, and provides the revenue they need to turn the company around.

Strategy

Wendy’s plans to improve their business by:

Management

Wendy’s hired a new CEO, Robert D. “Bob” Wright, on May 21, 2026. He used to be the CEO of Potbelly from July 2020 – December 2025. He was also the Chief Operating Officer of Wendy’s from 2014 – 2019.

Bob Wright had a good run at Potbelly. During his tenure, the stock went from ~$2 to $17.12. Potbelly was bought by RaceTrac in 2025.

Prior to Bob Wright, Wendy’s CFO, Ken Cook, was the interim CEO and CFO for 10 months. Serving as both the CEO and CFO of a multibillion-dollar business was a recipe for disaster.

Hiring Bob Wright seems like a good move for Wendy’s.

Board of Directors Experience

3 of 9 board members have deep restaurant experience.

I expect the new CEO to add board members who have deep restaurant experience.

I don’t like the capital allocation decisions Wendy’s made in the past. It seems the leadership team focused more on financial engineering than investing in their franchisees and improving their competitive position.

In 2025, they cut the dividend by 44%, but then increased their stock buyback 2.6x the previous year.

It’s moves like these that make me believe executives of public companies do not care about shareholders and the long-term viability of their companies. Why not use the cash to pay down debt, reinvest into the business, or just save it for a rainy day?

What did $200 million in stock buybacks accomplish? They bought shares at an average price of ~$13.93. The stock is now ~$6.80.

Large Shareholder

The 500-pound elephant in the room is Wendy’s largest shareholder, Trian Fund Management. Trian owns 16% of Wendy’s stock and has been involved with the company since 2005. Two board members are related to Trian, Peter May and Matthew Peltz.

Trian Fund is led by Nelson Peltz, a well respected investor. Peltz also has a minority interest in a fund that owns 87 Wendy’s franchises.

The Financial Times reported that he is trying to raise money, so he can take Wendy’s private.

Debt Level

The company has $2.78 billion of debt and $299 million in cash.

Although I don’t like debt, the good thing about Wendy’s debt level is their trailing 12 months operating income (~$325 million) covers their interest expense ($129 million). Their loans are also not due until 2028–2032.

Valuation

Based on my conservative valuation model, Wendy’s is worth ~$11. I bought my shares for $6.79, a 38% discount.

The company’s revenue fell 3.1% in 2025 vs 2024.

The weakness continued in Q1 2026 because global comparable sales fell 6.8% due to a decline in traffic.

The restaurant industry is very competitive right now. Restaurants are heavily discounting their prices to woo cash-strapped customers. People are also using the GLP-1 drugs which curb their appetite. Wendy’s needs to keep their prices low, and work on giving customers an excellent store and food experience. If not, sales will continue to decline.

Free Cash Flow

The company’s free cash flow has been volatile over the last 7 years. Based on management’s guidance, I estimate the free cash flow to be ~$190-205 million in 2026.

Dividend

There is a good chance Wendy’s will cut their dividend again. In February 2025, they cut the dividend from $1 to $0.56. They said the dividend should be 50 – 60% of their adjusted earnings. Their 2026 guide for adjusted earnings is $0.56 – $0.60, so the dividend is now 93-100% of adjusted earnings.

At the low end on their free cash flow guide of $190 - $205 million, their free cash flow dividend coverage is 1.79x. Ample room to keep the dividend, but the new CEO might cut it anyway.

When running my numbers, I assumed they will cut the dividend again by 50%. If they do, my yield will be 4.12% instead of 8.25%.

They might even eliminate the dividend completely. Let’s see.

The most realistic way for my investment to grow is if Wendy’s:

I believe this is a good investment because I am buying the 2nd largest burger chain in the U.S. for 38% less than what I think it’s worth.

The food tastes great, their brand is recognizable, the stock might experience a short squeeze, and a potential buyer might be in the wings.

I bought 43 shares for $292. I want to hear the new CEO’s plan when he does his first conference call in August. Based on the call, I will decide whether to buy more shares or not.

I hope they hire more experienced board members. That is going to be key.

Remember to pray for the Bronx and its success.

“By the blessing of the upright a city is exalted, but by the mouth of the wicked it is overthrown.”
Proverbs 11:11 ESV

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