Starbucks Corporation (SBUX), The Wendy’s Co (WEN): Examining US Restaurant Chain Leaders

The company is up by 17.5% year-to-date, and I expect the company to continue rewarding its shareholders.

While others are struggling for pennies

The Wendy’s Co (NASDAQ:WEN) is now the world’s third-largest quick-service hamburger company. The Wendy’s Co (NASDAQ:WEN)’s has more than 6,500 franchise and company restaurants in the US and 27 other countries.

Even when the company has wisely refinanced some of its loans to lower interest rates, the underlying business is still not performing on par with its peers. The Wendy’s Co (NASDAQ:WEN) operating margins of 3% are 33% higher than they were six month ago, but still trail behind most of its peers. Though it shows year-over-year top line growth, at 1.7% that growth is less than exciting. That said, the company is spending heavily to renovate its restaurants to more closely resemble the bistro eateries that are rising in popularity and is ready to start ameliorating fast.

With its earnings-per-share growing at an unsustainable but still impressive 200% year-over-year pace, The Wendy’s Co (NASDAQ:WEN)’s trades at 28.5 times its price-to-earnings ration and pays a 2.7% cash dividend yield.

Bottom line

While McDonald’s Corporation (NYSE:MCD) is the safest bet among its peers, it also has the lowest up-side potential. The Wendy’s Co (NASDAQ:WEN)’s is a completely different story. The company is reforming itself and is still far from reaching the 19+% operating margins McDonald’s has. Starbucks Corporation (NASDAQ:SBUX) is my favorite pick among the three companies, however, as the coffee company is ameliorating margins and growing fast while it sells at a reasonable multiple.

Vanina Egea has no position in any stocks mentioned. The Motley Fool recommends McDonald’s and Starbucks. The Motley Fool owns shares of McDonald’s and Starbucks. Vanina is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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