Wendy’s Has an A for Momentum but a D for Growth—What Zacks’ WEN Scores Really Mean

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Meta description: Zacks gives Wendy’s an A for Momentum but a D for Growth. We analyze what the conflicting WEN scores reveal about valuation and the turnaround.

Excerpt: Wendy’s stock has developed considerable market momentum, but the company’s reported results have not yet confirmed a fundamental recovery. Here is what Zacks’ conflicting scores reveal about WEN.

«Scorecard note: The Zacks Rank and Style Scores are dynamic and can change as share prices and analyst earnings estimates are updated. The scores below were displayed on the Zacks Wendy’s research page when accessed on July 16, 2026.»

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The current Zacks Style Scores for The Wendy’s Company offer one of the clearest summaries of the Wendy’s investment debate.

According to the “Zacks research page for Wendy’s” (https://www.zacks.com/stock/research/WEN/stock-style-scores), WEN currently carries:

The apparent contradiction is the message.

Wendy’s shares have developed significant momentum, earning the highest possible grade in that category. Yet the company receives a weak Growth Score and only average Value and combined VGM scores.

In plain English:

«Wendy’s stock has recovered faster than the Wendy’s business.»

The market has begun pricing in the possibility of a turnaround. The reported financial results have not yet confirmed that the turnaround is succeeding.

That makes Wendy’s an unusually important stock to separate into two questions:

1. Is the stock moving in the right direction?
2. Is the underlying business moving in the right direction?

Zacks currently answers the first question with an A and the second with a D.

What the Zacks Scores Measure—and What They Do Not

The Zacks Style Scores grade stocks from A through F across three primary investing characteristics:

– Value, using measures such as price-to-earnings, PEG, price-to-sales and price-to-cash-flow ratios.
– Growth, using historical and projected earnings, sales and cash-flow measures.
– Momentum, using recent share-price performance and changes in earnings expectations.
– VGM, which combines value, growth and momentum into a weighted score.

The Style Scores are designed to complement the Zacks Rank, a system driven primarily by changes in analysts’ earnings estimates. Zacks describes the Rank as a short-term timing indicator intended to be most effective over approximately one to three months. Its preferred combination is generally a #1 Strong Buy or #2 Buy ranking paired with an A or B Style Score.

That distinction is essential.

A Zacks #3 Hold is not a declaration that Wendy’s cannot be attractive over a three-to-five-year investment horizon. It means Wendy’s does not currently have the degree of positive earnings-estimate momentum that would place it in Zacks’ highest near-term ranking groups.

BuyWendys.com evaluates Wendy’s primarily as a fundamental, long-term investment. Zacks is evaluating whether the stock has the characteristics associated with near-term outperformance.

The two approaches can reach different conclusions without either one necessarily being wrong.

Why Wendy’s Earns an A for Momentum

The A Momentum Score is supported by a genuine change in investor behavior.

Zacks reported on July 6 that Wendy’s shares had risen 27.6% over one month, substantially outperforming the restaurant industry and the broader market. The stock had also moved above its 50-day moving average at the time of the analysis.

The rally reflected several overlapping developments:

– Growing investor attention around Project Fresh
– Wendy’s major China development agreement
– Continued digital-sales growth
– A high level of short interest
– Increased retail-investor participation
– Speculation about strategic alternatives
– The appointment of Steve Cirulis as chief financial officer and chief strategy officer

The Momentum Score also incorporates earnings-related signals, not merely share-price movement.

Zacks reported that its consensus estimate for Wendy’s 2026 earnings had increased approximately 1.8% over the preceding 60 days, although a subsequent article said the estimate had been unchanged during the latest 30-day period.

That suggests the rally was not entirely disconnected from fundamentals. Earnings expectations had shown modest stabilization or improvement.

However, a 1.8% upward revision is not the same as a broad, sustained earnings-upgrade cycle. The estimate trend had improved enough to support momentum, but not enough to move Wendy’s above a #3 Hold ranking.

The A Momentum Score therefore tells investors something important:

«The market’s assessment of Wendy’s has improved, even though the company’s operating results remain weak.»

That can be an early signal of a genuine recovery. It can also mean the share price has moved ahead of the available evidence.

Why Wendy’s Receives a D for Growth

The D Growth Score is difficult to challenge based on Wendy’s most recently reported results.

For the first quarter of 2026, Wendy’s reported:

Wendy’s attributed the pressure to lower customer traffic, commodity inflation, labor inflation, weaker franchise royalty revenue and increased investment in the turnaround.

Management nevertheless maintained its 2026 outlook for:

– Approximately flat global systemwide sales
– Adjusted EBITDA of $460 million to $480 million
– Adjusted EPS of $0.56 to $0.60
– Free cash flow of $190 million to $205 million

Those results and forecasts explain the weak Growth Score. The current financial statements do not show an expanding business. They show a company attempting to stabilize a declining U.S. restaurant system while investing in a recovery.

Wendy’s may have credible future growth drivers, but the quantitative evidence still includes:

– Falling U.S. same-restaurant sales
– Lower customer traffic
– Declining EBITDA
– Margin compression
– Falling earnings per share
– Reduced free cash flow
– Lower near-term earnings expectations than the prior year

The D does not mean Wendy’s has no growth opportunities.

It means those opportunities have not yet overcome the weakness visible in the reported numbers.

Digital Sales Are Growing—but Traffic Remains the Real Test

Digital is one of Wendy’s clearest positive indicators.

U.S. digital sales increased 8.4% in the first quarter, while digital channels represented approximately 22.7% of domestic sales. Wendy’s has also integrated AI-powered recommendations into its mobile application and expanded payment options intended to improve checkout conversion.

Those capabilities could create meaningful long-term value.

A digitally identified customer can potentially receive more relevant offers, order more efficiently and visit more frequently. Wendy’s can also use digital data to improve marketing efficiency, menu recommendations and customer retention.

But digital sales growth must be evaluated alongside the 7.8% decline in U.S. same-restaurant sales.

Digital channels can increase their share of Wendy’s sales even when total restaurant demand is declining. Existing customers may simply be moving from the counter or drive-through speaker to the mobile application.

The decisive question is therefore not:

«Are Wendy’s digital sales growing?»

They are.

The more important question is:

«Is Wendy’s digital ecosystem creating incremental visits, higher frequency and improved restaurant-level economics?»

Until customer traffic stabilizes, digital growth should be viewed as an important turnaround tool—not proof that the turnaround is complete.

Why Might Wendy’s Receive Only a C for Value?

The C Value Score is the most surprising part of the Zacks scorecard.

At the July 15 closing price of $7.45, third-party market data showed Wendy’s trading at approximately:

Zacks separately calculated a forward 12-month P/E of approximately 14.3 times in its July 6 analysis, compared with an industry average above 23 times. Valuation multiples differ by data provider, estimate period and share price, but the direction is consistent: Wendy’s trades at a substantial headline discount to the restaurant industry.

Why, then, does Wendy’s receive only a C?

Zacks does not disclose on the Wendy’s scorecard exactly how much each underlying metric contributed to the final grade. It would therefore be inappropriate to attribute the C score to one specific ratio.

Several Wendy’s characteristics may nevertheless help explain why its low P/E does not automatically translate into an A or B Value Score.

1. Earnings are declining

A low P/E ratio can indicate undervaluation. It can also indicate that investors expect earnings to fall.

Zacks reported that its 2026 consensus EPS estimate implied a year-over-year decline of approximately 34.1%. A company trading at 13 or 14 times declining earnings may not rank as favorably as a company trading at a similar multiple with stable or growing earnings.

2. Equity value does not capture Wendy’s full capital structure

Wendy’s market capitalization was approximately $1.42 billion as of July 15, but its enterprise value was approximately $5.22 billion.

The difference largely reflects Wendy’s substantial debt position. Third-party market data listed approximately $4.12 billion of total debt and $299 million of cash, resulting in approximately $3.82 billion of net debt.

Regardless of how Zacks weights these metrics, investors should not evaluate Wendy’s solely through its market capitalization or equity P/E ratio.

On an enterprise basis, the valuation is less extreme:

– Approximately 10.9 times trailing EBITDA
– Approximately 23.5 times trailing free cash flow

Those multiples do not necessarily make Wendy’s expensive. They demonstrate that its apparent cheapness is partly a function of financial leverage.

3. Some valuation measures are less attractive

The same data source reported a PEG ratio of approximately 10.9 and a price-to-book ratio above 12.

Book value is not always particularly useful for an asset-light, franchised restaurant company with a highly leveraged balance sheet. The PEG ratio can also become distorted when expected growth is minimal or negative.

Still, the mixed readings help explain why a multi-factor value model may reach a more cautious conclusion than an investor looking only at trailing P/E.

4. The dividend requires continued cash-flow delivery

Wendy’s currently pays an annualized dividend of $0.56 per share.

That nearly equals management’s full-year adjusted EPS outlook of $0.56 to $0.60, implying an adjusted-EPS payout ratio of approximately 93% to 100% if Wendy’s delivers within guidance.

Free-cash-flow coverage appears stronger. Based on approximately 190.5 million shares outstanding, the dividend requires an estimated $107 million of annual cash, compared with Wendy’s free-cash-flow outlook of $190 million to $205 million.

That suggests the dividend would consume approximately 52% to 56% of guided free cash flow, before considering debt reduction, investment requirements, acquisitions or additional share repurchases. This is a derived estimate using current shares outstanding and management’s guidance.

The dividend is therefore not automatically unsustainable. But its safety depends on Wendy’s delivering the cash-flow recovery management expects.

The C Value Score Does Not Mean Wendy’s Is Expensive

It is important not to overinterpret the grade.

The C Value Score does not prove Wendy’s is fairly valued or overvalued.

It indicates that Wendy’s does not currently rank among the strongest value stocks within Zacks’ short-term, multi-factor methodology.

A long-term investor can still conclude that Wendy’s is undervalued if normalized future earnings and free cash flow will be materially higher than current expectations.

That is the essential Wendy’s valuation debate:

«Is the market capitalizing temporarily depressed earnings, or correctly discounting a structurally weaker business?»

If Project Fresh restores traffic and margins, the current equity price could prove exceptionally low relative to normalized earnings.

If U.S. traffic continues declining and franchisee economics weaken, the low P/E may represent a value trap rather than an opportunity.

What the Zacks Framework May Not Fully Capture

Quantitative scores are useful because they impose discipline. They can also understate developments that have not yet become visible in historical earnings and cash flow.

Wendy’s has several potential sources of long-term optionality.

Project Fresh is producing early operating evidence

Project Fresh combines menu improvements, value, marketing, restaurant cleanliness, order accuracy, training and system optimization.

According to Zacks’ summary of Wendy’s first-quarter commentary, company-operated restaurants that had more fully implemented the operational initiatives outperformed the broader U.S. system by approximately 310 basis points.

That does not prove the entire system will achieve the same result.

It does suggest that better execution can produce measurable sales improvement.

International development offers a separate growth engine

Wendy’s international systemwide sales increased 6% during the first quarter.

The company also signed an agreement to develop as many as 1,000 Wendy’s restaurants in China over ten years—the largest development agreement in the company’s history.

The China agreement will not transform Wendy’s earnings immediately. Restaurant development, franchise revenue and royalty contribution will emerge gradually.

But it provides a long-duration growth opportunity that may not be reflected fully in a score dominated by recent financial performance.

System optimization may improve the quality of the restaurant base

Wendy’s is closing structurally underperforming restaurants and reallocating resources toward stronger locations and franchisees.

Closures reduce the restaurant count and can pressure reported systemwide sales in the near term. However, removing persistently weak locations may eventually improve:

– Average unit volumes
– Franchisee health
– Restaurant-level margins
– Brand consistency
– Capital allocation
– The quality of the remaining system

Investors should evaluate the economics of the restaurants Wendy’s removes—not just the gross number of closures.

What the C VGM Score Really Says

The combined C VGM Score accurately reflects the lack of agreement among Wendy’s current investment signals:

Wendy’s is neither a clean quantitative buy nor a clean quantitative sell.

The bullish case is that the stock has begun recognizing an operational recovery before it appears fully in the financial statements.

The bearish case is that retail interest, short covering and strategic speculation pushed the stock ahead of the company’s actual earnings trajectory.

Both interpretations remain possible.

What Must Happen for Momentum to Become a Fundamental Revaluation

For the recent rally to become a durable revaluation rather than a temporary trading event, Wendy’s must produce measurable progress in several areas.

1. U.S. sales must improve sequentially

Wendy’s does not need to move immediately from a 7.8% decline to rapid growth.

It does need to show that the rate of deterioration is moderating and that management’s expected second-half improvement is beginning to emerge.

2. Customer traffic must stabilize

Average-check growth cannot carry the system indefinitely.

A sustainable recovery requires more customer visits, improved frequency or both.

3. Restaurant margins must recover

The first-quarter company-operated margin of 11.4% reflected lower traffic, approximately 8% commodity inflation and approximately 4% labor-rate inflation.

Wendy’s must demonstrate that better sales, execution and cost management can rebuild restaurant profitability.

4. Digital must generate incremental demand

Digital sales growth becomes economically powerful when it creates additional orders, higher frequency, improved attachment rates and more efficient marketing.

Merely shifting existing orders into the application is not sufficient.

5. Wendy’s must deliver its full-year guidance

Management continues to expect $460 million to $480 million of adjusted EBITDA and $190 million to $205 million of free cash flow.

Delivery within those ranges would strengthen confidence in the dividend, the turnaround and the company’s capacity to manage its capital structure.

A meaningful guidance reduction would weaken all three.

6. Analyst estimates must enter a sustained upgrade cycle

The recent 1.8% improvement in the 2026 consensus estimate is encouraging, but still modest.

A genuine fundamental inflection would likely produce repeated upward revisions across several months—not merely a temporary stabilization.

The BuyWendys.com View

The Zacks scorecard should not be interpreted as a recommendation that long-term investors abandon Wendy’s.

It should also not be used as evidence that the turnaround has already succeeded.

The most accurate interpretation is:

«Wendy’s has become a momentum stock before it has returned to being a growth company.»

That creates both opportunity and risk.

Equity markets often anticipate operating inflections before they appear in reported results. Investors waiting for every metric to turn positive may miss a substantial portion of the recovery.

But a rally based primarily on positioning, short covering and expectations can reverse quickly if the company fails to deliver improving traffic, margins and cash flow.

Zacks’ A Momentum Score tells us the market is paying attention.

The D Growth Score tells us Wendy’s still must earn that attention.

Bottom Line

Zacks’ #3 Hold rating appears reasonable within its short-term, earnings-revision-focused methodology.

Wendy’s offers:

– A discounted equity valuation
– A significant dividend yield
– Early Project Fresh operating evidence
– Continued digital growth
– International expansion potential
– Strategic and capital-allocation optionality

It also faces:

– Weak U.S. traffic
– Declining near-term earnings
– Margin pressure
– High financial leverage
– Intense restaurant competition
– A turnaround that remains unproven

The Zacks scores capture that tension unusually well.

The stock has momentum. The business does not yet have growth. The valuation is attractive on several equity measures, but more demanding after considering Wendy’s debt and declining earnings.

The next phase of the Wendy’s investment thesis will be determined not by whether the stock can attract more attention, but by whether Project Fresh can convert that attention into stronger restaurant traffic, margins, earnings and free cash flow.

«The A Momentum Score may ultimately prove to be an early signal of fundamental recovery. Until the operating results improve, however, it remains a signal—not confirmation.»

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Source

Review the dynamic scorecard directly on the “Zacks Wendy’s Style Scores page” (https://www.zacks.com/stock/research/WEN/stock-style-scores).

Related BuyWendys.com Analysis

Read our broader assessment: “Is Wendy’s Stock a Good Buy? Our 2026 House View on WEN” (https://buywendys.com/is-wendys-stock-good-buy-investor-guide/)

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Disclosure: The author owns shares of The Wendy’s Company. BuyWendys.com is an independent investor publication and is not affiliated with, endorsed by or sponsored by The Wendy’s Company. This article is for informational purposes, expresses the author’s opinion and does not constitute financial or investment advice. Zacks Rank and Style Scores are dynamic and may change as prices and earnings estimates are updated.

About Ben Edmond