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Why Cramer Prefers McDonald’s Over Wendy’s Stock

Wednesday, 28 Mar 2012 | 6:57 PM ET
Cramer's 'Tweet-Off': MCD vs. WEN
Mad Money's Jim Cramer answers viewers' "tweets" on whether McDonald's or Wendy's is the better buy.

Call it the “Battle of the Burger!”

“Mad Money” host Jim Cramer on Wednesday compared two fast food chain operators, McDonald’s and Wendy’s, to determine which has the better stock.

“The company with the better product doesn't always have the better stock,” Cramer said. “Wendy's might have the tastier burgers, but I'd rather buy McDonald's with its 2.9 percent yield and fabulous track record of execution and new management any day of the week.”

Cramer prefers McDonald’s stock because he thinks the company executes extremely well. Wendy’s, on the other hand, has a history of over promising and under delivering. While Wendy’s has recently improved same-store sales, Cramer is concerned about the scale of its restructuring plan. He thinks Wendy’s might be able to pull it off, but warned that these types of things take time. If Wendy’s can execute well, though, he thinks the stock could go much higher, but said “that’s far from a sure thing.”

“Wendy's is still trying to find itself, but the world already knows McDonald's,” Cramer said. “We know that McDonald's still has a ton of room to expand overseas, especially in India, China and Eastern Europe.”

Bottom line: Cramer thinks McDonald’s is the better buy, trading at 15.4 times earnings with a consistent 10 percent long-term growth rate while Wendy’s trades at 22.6 times earnings with a 17.5 percent growth trade that might not come to fruition.

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