Wendy’s (NASDAQ:WEN – Get Free Report) and Melco Resorts & Entertainment (NASDAQ:MLCO – Get Free Report) are both small-cap consumer discretionary companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, institutional ownership, valuation, earnings, risk, dividends and profitability.
Analyst Ratings
This is a breakdown of recent ratings and target prices for Wendy’s and Melco Resorts & Entertainment, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Wendy’s | 5 | 13 | 2 | 0 | 1.85 |
| Melco Resorts & Entertainment | 2 | 2 | 5 | 1 | 2.50 |
Wendy’s presently has a consensus price target of $7.82, suggesting a potential upside of 20.02%. Melco Resorts & Entertainment has a consensus price target of $7.27, suggesting a potential upside of 58.49%. Given Melco Resorts & Entertainment’s stronger consensus rating and higher probable upside, analysts plainly believe Melco Resorts & Entertainment is more favorable than Wendy’s.
Earnings & Valuation
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Wendy’s | $2.18 billion | 0.57 | $165.07 million | $0.66 | 9.87 |
| Melco Resorts & Entertainment | $5.16 billion | 0.34 | $185.04 million | $0.60 | 7.64 |
Melco Resorts & Entertainment has higher revenue and earnings than Wendy’s. Melco Resorts & Entertainment is trading at a lower price-to-earnings ratio than Wendy’s, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
86.0% of Wendy’s shares are owned by institutional investors. Comparatively, 39.6% of Melco Resorts & Entertainment shares are owned by institutional investors. 17.1% of Wendy’s shares are owned by company insiders. Comparatively, 57.1% of Melco Resorts & Entertainment shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
Volatility and Risk
Wendy’s has a beta of 0.39, suggesting that its share price is 61% less volatile than the S&P 500. Comparatively, Melco Resorts & Entertainment has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500.
Profitability
This table compares Wendy’s and Melco Resorts & Entertainment’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Wendy’s | 5.72% | 115.31% | 2.70% |
| Melco Resorts & Entertainment | 4.50% | -23.81% | 3.18% |
Summary
Melco Resorts & Entertainment beats Wendy’s on 9 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 Melco Resorts & Entertainment
Melco Resorts & Entertainment Limited, through its subsidiaries, develops, owns, and operates casino gaming and entertainment casino resort facilities in Asia. It owns and operates City of Dreams, an integrated casino resort that has 500 gaming tables and 800 gaming machines; approximately 1,400 hotel rooms and suites; a wet stage performance theater with approximately 2,000 seats; approximately 30 restaurants and bars, and 150 retail outlets; and recreation and leisure facilities, including health and fitness clubs, swimming pools, spa and salons, and banquet and meeting facilities. The company also operates Altira Macau, a casino hotel, which has approximately 112 gaming tables and 56 gaming machines; 230 hotel rooms; various fine dining and casual restaurants, and recreation and leisure facilities; and various non-gaming amenities comprising spa, gymnasium, outdoor garden podium, and sky terrace lounge. In addition, it operates Studio City, a cinematically-themed integrated entertainment, retail, and gaming resort that comprises 280 gaming tables and 980 gaming machines in Cotai, Macau. Further, the company owns and operates 7 Mocha Clubs with 1,034 gaming machines, as well as Taipa Square casino in Taipa Island, Macau. Additionally, it operates and manages City of Dreams Manila, a casino, hotel, retail, and entertainment integrated resort in the Entertainment City complex in Manila. The company was formerly known as Melco Crown Entertainment Limited and changed its name to Melco Resorts & Entertainment Limited in April 2017. Melco Resorts & Entertainment Limited was incorporated in 2004 and is based in Central, Hong Kong. As of February 16, 2017, Melco Resorts & Entertainment Limited operates as a subsidiary of Melco Leisure and Entertainment Group Limited.
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