Wendy’s Is Destroying Itself To Repurchase Shares

If you’ve been following Wendy’s stock over the past few years, you may have noticed that the stock price has quadrupled in value from $4 in 2009 to $16 today while earnings have tripled over that same time frame from $0.20 to $0.60.

This strong ten-year performance is not indicative of a business that is positioned to deliver strong long-term returns over the coming generation.

While Wendy’s management deserves credit for realizing the advantages that come with the 4-for-$4 deal, making money by boosting traffic and earning high profit margins on the mandatory drink portion of the order to offset the lower profit margins on the food items, it has not been managing the company’s balance sheet as prudently.

A significant portion of Wendy’s earnings per share growth is the result of stock repurchases funded by debt, and as a result, Wendy’s now has a leveraged balance sheet that will … Read the rest of this article!