$Wing is currently trading at $383, with a valuation of $11,270,000,000.
Short Thesis: Wingstop is grossly overrated and trading at illogical multiples at these levels due to a high debt load and overvalued stores.
Each McDonald's location is worth about $4,351,776, or 4.3 million. McDonald’s is an established giant in the sector and the largest in the world, calculated by its market cap/locations.
Wingstop’s is an astounding $5,640,000, or 5.6 million per location.
This means Wingstop stores are worth 1.3 million more than every McDonald's location per location.
Well, then, surely Wingstop must have astounding revenue at each location. Wingstops average yearly revenue per location is around 1.59 million. (circa 2023)
McDonald’s, however, reports an average revenue per location of around 2.7 million per year. (circa 2023)
McDonald’s is seen as the leader in fast food and a known juggernaut, trading at a measly multiple of 21x earnings. Wingstop, with only 2,000 stores (39,000 less than McDonald's), trades at multiples of 136x.
So here are my thoughts on its valuation compared to its peers. Surely, Wingstop must have a healthy balance sheet to support these insane valuations. WRONG.
A few KEY facts
- -164% debt-to-equity ratio
- 712 million in debt, all due in 2027 or 2029
- 846 Million in total liabilities, with only 412 million in total assets
- Negative shareholder equity
- Debt not covered by operating cash flow
- Pays a 0.2% dividend compared to a 2.4% industry average
So, we have incredibly weak financial statements that are being propped up by high-forecasted earnings growth.
Institutional ownership:
Within the past year, insiders have sold 20,763 shares and purchased 0. This lowered Insider ownership to a staggeringly low 0.295%. Insiders at Wingstop don't even believe in themselves. They’ve enjoyed a 100% rise in the stock over the past year and 50% YTD, and no insiders ever bought shares during this timeframe.
Intrinsic value:
Fair value was calculated to be at $130 a share, implying a 65% decrease in the share price. (valueinvesting)
Intrinsic value is a measly $87.47 a share, implying a 77% drop (Alpha Spread)
Lastly, Morningstar has fair value set at $152 or 60% downside.
Position:
1/17/25 $250 Puts (4)
Leave a Reply