Analyzing Wendy’s (NASDAQ:WEN) and Papa John’s International (NASDAQ:PZZA)

Papa John’s International (NASDAQ:PZZA) and Wendy’s (NASDAQ:WEN) are both small-cap consumer discretionary companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, valuation, profitability, institutional ownership, risk and earnings.

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Papa John’s International	$2.05 billion	0.31	$30.53 million	$0.75	25.59
Wendy’s	$2.18 billion	0.73	$165.07 million	$0.51	16.35

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

Analyst Recommendations

This is a breakdown of current ratings for Papa John’s International and Wendy’s, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Papa John’s International	2	7	0	0	1.78
Wendy’s	6	10	1	0	1.71

Papa John’s International presently has a consensus target price of $28.57, indicating a potential upside of 48.89%. Wendy’s has a consensus target price of $7.56, indicating a potential downside of 9.32%. Given Papa John’s International’s stronger consensus rating and higher probable upside, equities analysts clearly believe Papa John’s International is more favorable than Wendy’s.

Risk and Volatility

Papa John’s International has a beta of 1.17, meaning that its share price is 17% more volatile than the S&P 500. Comparatively, Wendy’s has a beta of 0.37, meaning that its share price is 63% less volatile than the S&P 500.

Insider & Institutional Ownership

86.0% of Wendy’s shares are held by institutional investors. 1.8% of Papa John’s International shares are held by insiders. Comparatively, 17.1% of Wendy’s shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Papa John’s International and Wendy’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Papa John’s International	1.31%	-9.65%	5.21%
Wendy’s	4.40%	93.77%	2.28%

Summary

Wendy’s beats Papa John’s International on 9 of the 14 factors compared between the two stocks.

About Papa John’s International

Papa John’s International, Inc. operates and franchises pizza restaurants under the Papa Johns brand. Its restaurants offer pizza alongside sides, desserts and beverages, with ordering options that include delivery and carryout. The company was founded in 1984 by John Schnatter, who opened its first restaurant in Jeffersonville, Indiana. Papa Johns has since expanded across the United States and into international markets, serving customers through company-owned restaurants and franchised locations.

About Wendy’s

The Wendy’s Company operates and franchises quick-service restaurants under the Wendy’s name. Founded by Dave Thomas in Columbus, Ohio, in 1969, the chain is known for hamburgers made with fresh, never-frozen beef in the United States, along with chicken sandwiches, nuggets, fries, salads and its signature Frosty dessert. Wendy’s restaurants also offer breakfast items and a range of beverages. The company serves customers in the United States and international markets through a mix of company-operated and franchised locations.