Fast food is about as competitive a business as you can find. When you’re selling $3-$5 meals, there isn’t much margin to go around. No surprise then that WEN has been on the edge of profitability for many years now. The company has earned between $0.15 and $0.20 per calendar year for the past 5 years. The CEO discussed the difficulty of keeping share in the “value-focused” customer segment, and so Wendy’s would be more focused on promoting its value menu. Maybe I might make my way over there just yet…
After a spectacular fall in 2007 and 2008, the stock has been remarkably quiet as well. The monthly chart shows just how steep that descent was:
On the shorter, weekly time frame, the stock had been in a surprisingly tight range for 3 years, fluctuating back and forth between $4 and $5.50 for the entire period. The stock finally broke out above $5.50 to start this year, but yesterday’s stagnant earnings report knocked the stock back below $6, and likely deflated much of the enthusiasm behind the recent break:
My guess is that WEN is still dead money, and wouldn’t be interested in it in either direction. But I wanted to present it today as an illustration that not all breakouts are created equal. Simply watching a stock break important resistance is only one piece of a potential long-term breakout play.