Wendy's Co/The is scored 38 for moat and 37 for management. The management score rests on a return on invested capital of 5.1% and a gross margin of 26.9% — figures that describe capital earning less than it costs to employ. The balance sheet carries debt at 35.31x equity, which magnifies both the returns above and the risk beneath them.
The price anchors are built on deliberately conservative assumptions. Growth is modelled at 4.7% a year, below the 5.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 9.3x. That produces an intrinsic value of $2.40, a 10-CAP price of $15.30 and a payback time price of $15.10, with the value zone set at the highest of the three, $15.30. Today's price of $6.25 sits inside that zone.
The price sits inside the value zone, but the business scores 38 for moat and 37 for management. Cheap and good are different tests, and only one of them is passed here.
| Price | $6.25 |
| Market cap | $1.2B |
| P/E ratio | 9.5x |
| Return on invested capital | 5.1% |
| Gross margin | 26.9% |
| Debt to equity | 35.31x |
| Free cash flow yield | 15.0% |
| Growth rate used | 4.7% |
| Growth rate measured | 5.0% |
| Exit multiple assumed | 9.3x |
| Company | Moat | Buy price |
| Arcos Dorados Holdings Inc-A (ARCO) | 70 | $16.03 |
| Shake Shack Inc. (SHAK) | 82 | $26.70 |
| CAVA Group, Inc. (CAVA) | 54 | $13.40 |
| Domino's (DPZ) | 67 | $207.33 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Wendy's Co/The rather than accepting ours.