Comparing Wendy’s (NASDAQ:WEN) & Melco Resorts & Entertainment (NASDAQ:MLCO)

Melco Resorts & Entertainment (NASDAQ:MLCO) and Wendy’s (NASDAQ:WEN) are both small-cap consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, profitability, dividends, valuation, analyst recommendations, institutional ownership and risk.

Profitability

This table compares Melco Resorts & Entertainment and Wendy’s’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Melco Resorts & Entertainment	4.50%	-23.81%	3.18%
Wendy’s	5.72%	115.31%	2.70%

Insider & Institutional Ownership

39.6% of Melco Resorts & Entertainment shares are owned by institutional investors. Comparatively, 86.0% of Wendy’s shares are owned by institutional investors. 57.1% of Melco Resorts & Entertainment shares are owned by company insiders. Comparatively, 17.1% of Wendy’s shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and target prices for Melco Resorts & Entertainment and Wendy’s, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Melco Resorts & Entertainment	2	2	5	1	2.50
Wendy’s	5	13	2	0	1.85

Melco Resorts & Entertainment presently has a consensus price target of $7.27, suggesting a potential upside of 71.79%. Wendy’s has a consensus price target of $7.82, suggesting a potential upside of 28.19%. Given Melco Resorts & Entertainment’s stronger consensus rating and higher possible upside, research analysts clearly believe Melco Resorts & Entertainment is more favorable than Wendy’s.

Volatility and Risk

Melco Resorts & Entertainment has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500. Comparatively, Wendy’s has a beta of 0.4, meaning that its share price is 60% less volatile than the S&P 500.

Dividends

Melco Resorts & Entertainment pays an annual dividend of $0.65 per share and has a dividend yield of 15.4%. Wendy’s pays an annual dividend of $0.28 per share and has a dividend yield of 4.6%. Melco Resorts & Entertainment pays out 108.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Wendy’s pays out 42.4% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares Melco Resorts & Entertainment and Wendy’s”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Melco Resorts & Entertainment	$5.18 billion	0.31	$185.04 million	$0.60	7.05
Wendy’s	$2.20 billion	0.53	$165.07 million	$0.66	9.24

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.

Summary

Melco Resorts & Entertainment beats Wendy’s on 10 of the 17 factors compared between the two stocks.

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.

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.