Why Wendy's Stock Surged Last Month

By Markets Fool.com

What:Shares of fast-food chainThe Wendy's Company gained 16% in March according to data from S&P Global Market Intelligence. The burger chain seemed to benefit from the overall recovery in the market as well as a buy rating from an analyst firm.

Continue Reading Below

So what:Longbow Research initiated a buy rating on Wendy's, saying that the company's turnaround story had just begun, and credited its shift to a "less capital intensive, higher franchised model, which should generate a more predictable and accelerated free cash flow that warrants a higher multiple for the shares." Longbow also gave the stock a $13 price target.

There was little news out on Wendy's stock last month, but the stock has been a solid winner over the last several years as investors continue to be convinced by the company's turnaround plan.

Now what:Wendy's stock plummeted following its recent earnings report in February, but the stock has battled back alongside the broader recover in the market as theS&P 500has gained more than 10% since then. Like many of its rivals, Wendy's has been busy refranchising and refurbishing restaurants, hoping to boost customer traffic and cut general and administrative expenses, a strategy that seems to be working. Deals like its 4 for $4 menu have delivered a consistent increase in same-store sales. However, at a P/E of 30, the stock may be pushing the limits of its valuation. I wouldn't expect last month's run to continue.

The article Why Wendy's Stock Surged Last Month originally appeared on Fool.com.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Continue Reading Below