Analyzing Denny’s (NASDAQ:DENN) & Wendy’s (NASDAQ:WEN)

Denny’s (NASDAQ:DENN) and Wendy’s (NASDAQ:WEN) are both small-cap retail/wholesale companies, but which is the superior stock? We will compare the two companies based on the strength of their analyst recommendations, risk, valuation, dividends, profitability, earnings and institutional ownership.

Profitability

This table compares Denny’s and Wendy’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Denny’s	2.24%	-60.26%	4.19%
Wendy’s	8.43%	125.74%	3.88%

Analyst Ratings

This is a breakdown of current recommendations and price targets for Denny’s and Wendy’s, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Denny’s	0	6	2	0	2.25
Wendy’s	5	17	4	1	2.04

Denny’s currently has a consensus target price of $5.96, indicating a potential downside of 4.03%. Wendy’s has a consensus target price of $10.59, indicating a potential upside of 25.03%. Given Wendy’s’ higher possible upside, analysts clearly believe Wendy’s is more favorable than Denny’s.

Earnings & Valuation

This table compares Denny’s and Wendy’s”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Denny’s	$452.33 million	0.71	$21.57 million	$0.20	31.08
Wendy’s	$2.25 billion	0.72	$194.36 million	$0.94	9.01

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

Insider & Institutional Ownership

85.1% of Denny’s shares are held by institutional investors. Comparatively, 86.0% of Wendy’s shares are held by institutional investors. 4.2% of Denny’s shares are held by company insiders. Comparatively, 17.0% of Wendy’s shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility & Risk

Denny’s has a beta of 1.43, indicating that its stock price is 43% more volatile than the S&P 500. Comparatively, Wendy’s has a beta of 0.39, indicating that its stock price is 61% less volatile than the S&P 500.

Summary

Wendy’s beats Denny’s on 11 of the 15 factors compared between the two stocks.

About Denny’s

Denny’s Corp. engages in the operation of restaurants and franchised, and licensed restaurants. It operates through the Denny’s and Other segments. The Denny’s segment includes the results of all company and franchised and licensed Denny’s restaurants. The Other segment refers to the results of all company and franchise restaurants. The company was founded by Harold Butler and Richard Jezak in 1953 and is headquartered in Spartanburg, SC.

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.