Industry: consumer services
Wendy’s owns and franchises Wendy’s restaurants in the U.S..
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|Book value of equity per share||$2.78||43.3%||-10%||-5.8%|
|BV including aggregate dividends||61.9%||-2.5%||-0.8%|
|1 year||5 years||10 years|
|Most recent||Growth rate (CAGR)|
|1 year||5 years||10 years|
|1 year||5 years||10 years|
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
On April 23, 1993, DWG Acquisition Group, L.P. ("DWG Acquisition"), a Delaware limited partnership the sole general partners of which are Nelson Peltz and Peter W. May, acquired shares of common stock of Triarc (then known as DWG Corporation ("DWG")) from Victor Posner ("Posner") and certain entities controlled by Posner (together with Posner, the "Posner Entities"), representing approximately 28.6% of Triarc's then outstanding common stock... Pursuant to a Settlement Agreement dated as of January 9, 1995 (the "Settlement Agreement") among Triarc and Posner and certain Posner Entities, a Posner Entity converted the $71.8 million stated value of Triarc's 8-1/8% Redeemable Convertible Preferred Stock ("Redeemable Convertible Preferred Stock") (which paid an aggregate dividend of approximately $5.8 million per annum) owned by it into 4,985,722 shares of Triarc's non-voting Class B Common Stock.
On October 25, 2000, the Company completed the sale of Snapple Beverage Group, Inc., the parent company of Snapple Beverage Corp., Mistic Brands, Inc. and Stewart's Beverages, Inc., and Royal Crown Company, Inc. to affiliates of Cadbury Schweppes plc for $901,250,000 in cash, subject to post-closing adjustment, and the assumption of $425,112,000 of debt and related accrued interest.
On August 10, 2001, the Company purchased all of the remaining 1,999,207 non-voting Triarc Class B common shares held by affiliates of Victor Posner at a per share price of $21.93, for a total purchase price of approximately $43.8 million, pursuant to a definitive purchase agreement approved by the Company's Board of Directors in August 1999. As previously announced, under such agreement the Company agreed to purchase for cash all of the 5,997,622 non-voting Class B common shares held by Victor Posner affiliates in three separate transactions, at prices ranging from $20.44 to $21.93. The Company previously purchased approximately 2.0 million Class B common shares at $20.44 per share in August 1999 and approximately 2.0 million Class B common shares at $21.18 per share in August 2000.
On September 4, 2003, we made a stock distribution of two shares of a newly designated series of our previously authorized class B common stock for each share of our class A common stock issued as of August 21, 2003. The newly designated series of class B common stock is entitled to one-tenth of a vote per share, has a $.01 per share liquidation preference and is entitled to receive regular quarterly cash dividends per share of at least 110% of any regular quarterly cash dividends per share when, as and if, declared on the class A common stock and paid on or before September 4, 2006. Thereafter, the class B common stock will participate equally on a per share basis with the class A common stock in any cash dividends.
...in connection with the acquisition of the RTM Restaurant Group on July 25, 2005 the Company issued 9,684,000 shares of the Company's Class B Common Stock that will increase the number of shares used to calculate basic and diluted income or loss per share for periods subsequent to July 25, 2005 and stock options which are exercisable into 774,000 shares of the Company's Class B Common Stock that could increase the number of shares used to calculate diluted income per share, computed using the treasury stock method, subsequent to July 25, 2005.
Effective September 29, 2008, in conjunction with the merger with Wendy's International, Inc. ("Wendy's") (see Note 2) the corporate name of Triarc Companies, Inc. ("Triarc") changed to Wendy's/Arby's Group, Inc. ("Wendy's/Arby's" and, together with its subsidiaries, the "Company" or "We")... On September 29, 2008, Triarc and Wendy's completed their previously announced merger in an all-stock transaction in which Wendy's shareholders received a fixed ratio of 4.25 shares of Wendy's/Arby's Class A common stock for each Wendy's common share owned. In the merger, approximately 377,000,000 shares of Wendy's/Arby's common stock were issued to Wendy's shareholders. The merger value of approximately $2.5 billion for financial reporting purposes is based on the 4.25 conversion factor of the Wendy's outstanding shares as well as previously issued restricted stock awards both at a value of $6.57 per share which represents the average closing market price of Triarc Class A Common Stock two days before and after the merger announcement date of April 24, 2008. Wendy's shareholders held approximately 80%, in the aggregate, of the outstanding Wendy's/Arby's common stock immediately following the merger. In addition, effective on the date of the Wendy's merger, our Class B Common Stock was converted into Class A Common Stock. The merger will be accounted for using the purchase method of accounting in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations. In accordance with this standard, we have concluded that Wendy's/Arby's will be the acquirer for financial accounting purposes. The total merger value will be allocated to Wendy's net tangible and intangible assets acquired and liabilities assumed based on their estimated fair values with the excess recognized as goodwill. Wendy's operating results will be included in our financial statements beginning on the merger date.
On June 1, 2015, our Board of Directors authorized a new repurchase program for up to $1,400,000 (amounts in thousands) of our common stock through January 1, 2017, when and if market conditions warrant and to the extent legally permissible. As part of the authorization, the Company commenced an $850,000 share repurchase program on June 3, 2015, which included (1) a modified Dutch auction tender offer to repurchase up to $639,000 of our common stock and (2) a separate stock purchase agreement to repurchase up to $211,000 of our common stock from the Trian Group (as defined below in Note 13). For additional information on the separate stock purchase agreement see Note 13. During the second quarter of 2015, the Company incurred costs of $1,489 in connection with the tender offer, which were recorded to treasury stock. Subsequent to the second quarter of 2015, on June 30, 2015, the tender offer expired and on July 8, 2015, the Company repurchased 55,808 shares for an aggregate purchase price of $639,000. On July 17, 2015, the Company repurchased 18,416 shares, pursuant to the separate purchase agreement, for an aggregate purchase price of $210,867. As a result, the $850,000 share repurchase program that commenced on June 3, 2015 was completed. In August 2014, our Board of Directors authorized a repurchase program for up to $100,000 of our common stock through December 31, 2015, when and if market conditions warrant and to the extent legally permissible. For the six months ended June 28, 2015, the Company repurchased 5,655 shares with an aggregate purchase price of $61,631, excluding commissions of $86. In January 2014, our Board of Directors authorized a repurchase program for up to $275,000 of our common stock through the end of fiscal year 2014. The Company utilized the full authorization upon completion of a modified Dutch auction tender offer on February 19, 2014 resulting in 29,730 shares repurchased for an aggregate purchase price of $275,000. The Company incurred costs of $2,275 in connection with the tender offer, which were recorded to treasury stock.
During the third quarter of 2015, the Company repurchased $14,480K through the accelerated share repurchase agreement described below. As a result, the $100,000K share repurchase program authorized in August 2014 was completed... In August 2015, the Company entered into an accelerated share repurchase agreement with a third-party financial institution to repurchase common stock as part of the Companys existing share repurchase programs. Under the ASR Agreement, the Company paid the financial institution an initial purchase price of $164,500K in cash and received an initial delivery of 14,385 shares of common stock, representing an estimate of 85% of the total shares expected to be delivered under the ASR Agreement. The total number of shares of common stock ultimately purchased by the Company under the ASR Agreement was based on the average of the daily volume-weighted average prices of the common stock during the term of the ASR Agreement, less an agreed discount. On September 25, 2015, the Company completed the ASR Agreement and received an additional 3,551K shares of common stock. After the completion of the ASR Agreement, the Company had $400,114K remaining availability under its June 2015 authorization.