Is McDonald’s Still a Safe Investment?

With shares of McDonald’s Corp. (NYSE:MCD) trading at around $100.63, is MCD an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

McDonald’s has been given an OUTPERFORM rating here several times over the past four months. The stock has performed well over that time frame. However, has the situation changed? Will this rating be different? That can’t be revealed just yet, but the following list is a hint:

  • Enormous operating margin expansion over the past five years
  • Exceptional historical stock performance
  • Exceptional brand
  • International growth potential
  • 3.10 percent yield
  • Consistent top-line growth
  • Consistent bottom-line growth
  • Top-tier management
  • Stock is a favorite of analysts (this does help)

Other than poor industry trends due to a weakening consumer, the only negative is a decline in same-store sales. However, that decline in same-store sales last month was less than anticipated. The decline was 1.5 percent opposed to an expected decline of 3.0 percent.

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The chart below compares current fundamentals for McDonald’s, Burger King Worldwide (BKW), and Yum! Brands (NYSE:YUM). McDonald’s has a market cap of 100.56 billion, Burger King has a market cap of 6.62 billion, and Yum! Brands has a market cap of $30.51 billion.

MCD

BKW

YUM

Trailing   P/E

18.71

57.29

20.03

Forward   P/E

15.82

20.77

17.67

Profit   Margin

19.82%

5.99%

11.71%

ROE

36.82%

10.58%

76.06%

Operating   Cash Flow

$6.97 Billion

$224.40 Million

$2.29 Billion

Dividend   Yield

3.10%

1.00%

1.90%

Short   Position

1.30%

N/A

2.20%

 

Let’s take a look at some more important numbers prior to forming an opinion on this stock.

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