McDonald's MCD
What does McDonald's do?
McDonald's operates one of the world's largest restaurant systems in the quick-service segment and offers burgers, chicken products, french fries, breakfast, desserts and beverages. The majority of restaurants are run not by the company itself but by independent franchisees. In addition, there are development licenses and partnerships with regional operators in individual markets.
The company earns money mainly from rent, sales-based royalties and initial fees paid by franchisees, as well as from sales at the few company-operated restaurants. A significant portion of locations sits on land and in buildings that the company owns or leases and sublets. In competition, brand awareness, scale, location network, value perception, supply chain strength and digital offerings such as the app and delivery services matter. Competitors include other international chains as well as local providers.
Score profile
Rank vs. Restaurants (25 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, McDonald's ranks above average in the group Restaurants (7.8/10). On growth, the company ranks below average in the group Restaurants (4.0/10). On valuation (higher = cheaper), the stock ranks below average in the group Restaurants (2.8/10). On financial strength, McDonald's ranks above average in the group Restaurants (6.8/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 20.6x | 20.7x | better than 52 % |
| Trailing P/E | 22.3x | 26.0x | better than 57 % |
| PEG ratio | 2.9x | 1.6x | better than 12 % |
| EV/EBITDA | 16.7x | 16.4x | better than 48 % |
| Price/sales | 7.2x | 1.9x | better than 2 % |
| Revenue growth | 1.1% | 3.9% | better than 26 % |
| Earnings growth | 10.4% | 8.8% | better than 54 % |
| Gross margin | 57.6% | 26.7% | better than 94 % |
| Operating margin | 48.3% | 9.8% | better than 98 % |
| Net margin | 32.4% | 5.1% | better than 94 % |
| Return on equity | 0.0% | 8.0% | better than 24 % |
| Debt/equity | 0.0% | 86.3% | better than 83 % |
| Current ratio | 1.2x | 0.8x | better than 74 % |
| Free cash flow yield | 2.8% | 3.0% | better than 46 % |
| Dividend yield | 2.7% | 2.3% | – |
| Payout ratio | 58.9% | 51.3% | – |
| Beta | 0.43 | 1.16 | – |
Valuation: what is McDonald's worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give McDonald's a model range of 131.13 USD to 283.20 USD per share.
29 analysts, average rating “Buy”, average price target 299.00 USD (+6.0%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Customer traffic and sales in existing restaurants determine sales-based fees and rental income.
- The franchise and real estate model provides recurring, comparatively predictable income with lower capital requirements for restaurant operations.
- Menu innovation, pricing, promotions and digital offerings influence visitor numbers and the level of the average ticket.
Risks
- Weaker consumer sentiment or price sensitivity among customers can weigh on visitor numbers, particularly among lower-income households.
- Franchisee profits are pressured by costs for food, labor and energy, which can cause tensions within the system.
- Food safety, brand image, regulation and geopolitical conflicts can noticeably affect business in individual markets.
What to look for with McDonald's
Comparable restaurant sales growth is informative because it shows demand without the effects of new openings and thus foreshadows fee income.