Value and Growth on Sale in Fast Food

While companies like McDonald’s have recently had their moment in the spotlight, other fast food companies with strong fundamentals, higher growth, and better all around value have gone unnoticed until recently. McDonald’s two biggest competitors, Wendy’s/Arby’s Group and Burger King, sport slightly higher growth and much higher value when compared to their biggest competitor, McDonald’s.
Analysts on average expect McDonald’s to earn $3.84 a share in 2009 up slightly over the past 3 months from $3.81, giving them a forward price over earnings ratio of 15.53. McDonald’s has also been hovering near its 52 week high and has just recently fallen under $60 a share. Another reason to believe that McDonald’s time in the spotlight might be coming to an end is the seven insider sales over the past six months and the one buy. McDonald’s has an estimated growth rate of 9.33% a year for the next five years.
While Burger King beats McDonald’s on growth with a 14.93% growth rate per year for the next five and value with an estimate of $1.77 a share for the year 2009, leaving them with a forward price to earnings ratio of 12.62. As far as insider sales go McDonald’s and Burger King are neck and neck, each having seven sales. Though Burger King slightly lags McDonald’s with no buys to McDonald’s one.
The real winner of the race is definitely Wendy’s/Arby’s Group whose shares shot up nearly 7% on Friday to close at $5.50 a share, after being up almost 100% from its low in late October of $2.63 a share. After a gain like that it’s hard not to think Wendy’s/Arby’s Group might have already had their time in the spotlight as well. After being bought out by Arby’s for $2.3 billion in April of last year, Wendy’s has recently undergone a complete revamping of their restaurant as well as their menu. They now seem to have a value menu that is highly competitive with its much larger competitor, McDonald’s. Value menu aside, estimates for 2009 have remained steady at $1.12 a share leaving Wendy’s/Arby’s Group with an astoundingly low price to earnings ratio of just 4.91, and a 5 year growth rate of 14.33%, just a hair below the leader, Burger King. If doubts still remain about Wendy’s/Arby’s Group, one would only have to look at the seven insider purchases in the past 6 months and the zero sales to confirm that in fast food, Wendy’s/Arby’s Group bring you the most bang for your buck as well as the best prospect for growth in the coming years.