The dollar price of a stock means nothing in terms of its relative value. You can't say one company is worth twice as much as another because the stock is twice as much. Companies issue different numbers of shares, plus there are literally a hundred other factors that affect price.
Let's look at Wendy's. At $8 it seems like a bargain compared to McDonald's at $103 and Burger King at $25. Right? Wrong. To compare stock values look at other things, especially PE. Wendy's has a PE of 35 - that is dangerously high, it means the stock MAY be overvalued. At the very least there are big expectations with investors of great future earnings, and if those don't happen look out below. Burger King is also in the mid-30s PE.
McDonald's PE is about 19, much more reasonable. Plus McDonald's pays a nice big 3% plus dividend and Wendy's is I believe in the 2% range at most.
These aren't the only factors. You need to look at growth as well to see if that high PE is justified. But price alone is not anything you should think about.
I own some Wendy's stock.
Wendy's is in transformation mode, remodeling and modernizing their restaurants with fireplaces, TV, wifi, lounge seating, etc.
Scientific research has shown this kind of remodeling will increase sales by 25 percent.
At $8 it does look cheap, but it has a high P/E ratio....
But you know, there's no evidence that stocks with lower P/E ratios perform any better. I've seen expensive stocks go higher and cheap stocks get cheaper.
I didn't like it much when it was $4.00. Now I really don't like it.
It looks overvalued (expensive) with a 37.19 P/E.
Chart has a pretty clear downtrend. Revs down for 4 straight quarters.
The industry as a whole is having problems. Beef prices are increasing and workers demanding more money. Wendy's will be hit harder than the others.
The biggest problem I see is that they lack a niche in the market. They also haven't expanded globally as well as the other chains. And the ones I've been in weren't run very well.
I would have to say it doesn't look like a good investment to me.
Hello James. One thing you need to consider is that you cannot compare absolute prices between stocks. 100 shares selling for $5 means the company is valued at $500; while 1000 shares selling for $3 means the company is valued at $3000.
Just because Wendy's is $8 does not mean it's cheap. You need to consider many factors, including the price-earnings (which is actually high at 37) and price-book ratios.
Before beginning investing, I recommend doing a bit of research on how the market works. Some of the books I started out with were "Financial Intelligence: A Manager's Guide to Knowing the Numbers" and "Warren Buffett's 3 Favorite Books." Investopedia.com also has some great video tutorials.
You would be well served by reading and studying for 30 days before you buy anything. Go to Yahoo Finance and follow the links. Read the advertisers. Seek out the "experts" analysis. Go to Zacks, Motley Fool, Wall Street Journal, The Street, Forbes, CNBC.
"Investing" based on "hunches" or tips from your barber don't work.
Pattern yourself after Warren Buffett's method of investing. (you could do worse)
Hello, I love researching about stocks & want to invest in stocks when I get older & save a good amount of money. I was just wondering if Wendy's (fast food) (The Wendys Group) Would be a good long term investment? I noticed they are only at $8.06 compared to the high priced other fast food stocks! Thanks for the info!
