Okay, all this talk about stocks has gotten me excited. I think I'm ready to step away from my usual "safe" investments of gold and real estate. So I started looking at some prices of things that came to mind and may or may not be doing well... familiar companies. (Exxon, McDonald's, Disney, American Airlines, etc.) but then I checked for Wendy's... I *thought* the same way, but it confused me. How could Wendy's stock be opening today at $8.40? I'm thinking I'm missing something in my interpretation of pricing? Or is the corporation having huge problems I haven't heard about? So anyhow, have at me, investors... *MY* gut instinct would be to want to buy as many shares as I can in a place I've liked for years and I *thought* was doing well. (Again, if I didn't read the pricing wrong.) *Disclaimer*... of course I would not actually act on it without proper research, but I'm just learning and this particular stock sounds like a really good deal to me... tell me why it would be foolish (Or wise?!) to choose something like this as my introduction into the world of stocks?
OK, I am not aware of what the prices for Wendy's stock were before, I'm thinking that $8.40 is too low, is that what you're saying?
I believe you are saying that the stock prices to get in per share are $8.40 which from my experience is on the high end. Of course there are much higher stock that is out there and that is probably what you are shocked about. You look at McDonalds stock, and then Disney, which I know they had to be high and then you look at Wendy's and see a huge difference in price. Well be thankful that it is low if you wanted to get in on that stock.
Based upon the relatively low earnings it's had in recent years of 2 cents in '11 and '12, and 11 cents last year, the $8 price is understandable when you see that its price to earnings ratio is ~ 37, which is actually somewhat higher than the industry average of ~ 28. McD's earnings per share have consistently been much higher the last 3 years - over $5 a share in each of the last 3 years. It's PE ratio is actually lower than WEN's. As far as other factors, WEN's price to book value and price to sales ratios are more favorable, but MCD has much better margins, return on equity, and earnings per share growth. I'm not long either of these right now, but if I had to choose one, I'd go with McD. If I was going to buy both, I'd probably put $5 or $10 bucks into McD's for every $1 I'd put in WEN.
Just looking over the numbers very quickly I'd say that $8.40 is very expensive for WEN. And Kate I believe you are looking too much into the $ sign. The actual price in $ says nothing about how expensive or cheap the stock is. Look at P/E and P/B to see the actual value, and then into other numbers to see if it's actually worth paying that amount or not.
Thank you, JR. (You from Dallas, perchance?) That would answer my question, absolutely. I had no idea that their earnings were low recently... just dipping a toe in the stock market water. Problem is that I know there are sharks in that same water, so I need to trust myself to do the research. Whole new world for me. Between those two, I'd most likely go with McD's too. If WEN does some exciting things and climbs to McD's level, I'd be sorry in the future, but it could go the other way, too.
I thought Wendys was doing much better and making more money since they have been doing a lot of marketing lately. Maybe I am looking at this wrong or $8 is a good price for them?
Not too far from Dallas. I visit there on occasion. Much closer to Houston though. I agree that sticker price of a stock means little or nothing - it's the numbers behind the price that are important. I see McD's as much safer and more stable. Wen is much more of a gamble IMO - it's the type of stock I'd definitely only dabble in lightly if I bought it now, and I'd definitely consider put options for protection - at least ahead of earnings and other known events likely to change the price significantly either way. At the end of the day, they're selling $5 sandwiches - so I wouldn't expect a whole lot in the way of miraculous changes that would suddenly put them on par fundamentally either way. I actually like Wendy's food much better, but obviously many disagree with me.
