Head to Head Comparison: Denny’s (NASDAQ:DENN) and Wendy’s (NASDAQ:WEN)

Wendy’s (NASDAQ:WEN) and Denny’s (NASDAQ:DENN) are both small-cap retail/wholesale companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, dividends, profitability, valuation, institutional ownership, earnings and analyst recommendations.

Profitability

This table compares Wendy’s and Denny’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Wendy’s	8.43%	125.74%	3.88%
Denny’s	2.24%	-60.26%	4.19%

Institutional and Insider Ownership

86.0% of Wendy’s shares are owned by institutional investors. Comparatively, 85.1% of Denny’s shares are owned by institutional investors. 17.0% of Wendy’s shares are owned by insiders. Comparatively, 4.2% of Denny’s shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Wendy’s has a beta of 0.39, suggesting that its share price is 61% less volatile than the S&P 500. Comparatively, Denny’s has a beta of 1.43, suggesting that its share price is 43% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Wendy’s and Denny’s, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Wendy’s	5	17	4	1	2.04
Denny’s	0	6	2	0	2.25

Wendy’s presently has a consensus price target of $10.57, indicating a potential upside of 28.57%. Denny’s has a consensus price target of $5.96, indicating a potential downside of 3.80%. Given Wendy’s’ higher probable upside, equities analysts plainly believe Wendy’s is more favorable than Denny’s.

Valuation and Earnings

This table compares Wendy’s and Denny’s”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Wendy’s	$2.25 billion	0.70	$194.36 million	$0.94	8.74
Denny’s	$452.33 million	0.71	$21.57 million	$0.20	31.00

Wendy’s has higher revenue and earnings than Denny’s. Wendy’s is trading at a lower price-to-earnings ratio than Denny’s, indicating that it is currently the more affordable of the two stocks.

Summary

Wendy’s beats Denny’s on 10 of the 15 factors compared between the two stocks.

About Wendy’s

The Wendy’s Co. engages in operating, developing, and franchising a system of quick-service restaurants. It operates through the following segments: Wendy’s U.S., Wendy’s International, and Global Real Estate and Development. The Wendy’s U.S. segment includes the operation and franchising of Wendy’s restaurants in the U.S. The Wendy’s International segment is involved in the operation and franchising of Wendy’s restaurants in countries and territories other than the U.S. The Global Real Estate and Development segment focuses on real estate activity for owned sites and sites leased from third parties. The company was founded by R. David Thomas on November 15, 1969 and is headquartered in Dublin, OH.

About Denny’s

Denny’s Corp. engages in the operation of restaurants and franchised, and licensed restaurants. It operates through the Denny’s and Other segments. The Denny’s segment includes the results of all company and franchised and licensed Denny’s restaurants. The Other segment refers to the results of all company and franchise restaurants. The company was founded by Harold Butler and Richard Jezak in 1953 and is headquartered in Spartanburg, SC.