McDonald’s Breaks $100: Should You Buy?

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One of the better-performing stocks of the year has been McDonald’s (NYSE:MCD), the world’s largest food service company. McDonald’s operates and franchises restaurants all over the world that cater to virtually every demographic. Furthermore, the company owns an incredible amount of real estate — one of its strategies is to buy land that it will then rent to a franchisee, which also has to pay for franchising rights.

This strategy has catapulted McDonald’s valuation to about $100 billion.

With stocks generally weak for the year, investors have become less aggressive in their stock selections, and as a result, McDonald’s has been a beneficiary. The stock is up nearly 4 percent for the year, while the S&P 500 is up less than 1 percent. Furthermore, McDonald’s trades at a lower P/E ratio — 18 — than the S&P 500, which trades with a P/E over 20. Finally, McDonald’s pays a 3.2 percent yield, which isn’t huge, but which dwarfs the S&P’s paltry 1.8 percent yield.

Analysts expect McDonald’s to grow earnings over the next couple of years. While it earned $5.55 per share in 2013, it is expected to earn $5.81 per share in 2014 and $6.31 per share in 2015.

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