Overview of McDonald's (MCD) Stock - Overvalued With Poor Growth Indicators

McDonald's (MCD) shares moved -0.1% over the last 52 weeks, with a high of $281.67 and a low of $217.68. During this time, the stock underperformed the S&P 500 index by 19.6%.McDonald's Corporation operates and franchises McDonald's restaurants in the United States and internationally. The large-cap Consumer Cyclical company has 100,000 full time employees and is based in Chicago, IL. McDonald's has returned a 2.1% dividend yield over the last 12 months.

Stable Revenues and CAPEX Indicate Low to Moderate Growth:

2018-12-31 2019-12-31 2020-12-31 2021-12-31
Revenue (MM) $21,025 $21,076 $19,208 $23,223
Revenue Growth n/a 0.2% -8.9% 20.9%
Gross Margins 51.3% 52.74% 50.77% 54.17%
Gross Margins Growth n/a 2.81% -3.74% 6.7%
Operating Margins 40.84% 42.16% 37.52% 42.51%
Operating Margins Growth n/a 3.23% -11.01% 13.3%
Earnings Per Share $7.54 $7.88 $6.31 $10.04
EPS Growth n/a 4.51% -19.92% 59.11%
Free Cash Flow (MM) $4,225 $5,728 $4,624 $7,102
FCF Growth n/a 35.58% -19.27% 53.57%
Capital Expenditures (MM) $-2,742 $-2,394 $-1,641 $-2,040
Net Debt / EBITDA 2.96 3.17 3.81 2.65

McDonald's Has Elevated P/B and P/E Ratios :

Compared to the Consumer Cyclical sector's average of 24.11, McDonald's has a trailing twelve month price to earnings (P/E) ratio of 33.6 and, based on its Eps guidance of 10.49, an expected P/E ratio of 25.4. We also note that the company is using somewhat risky levels of leverage, as demonstrated by its Net Debt/EBITDA that has averaged over 3 during the last four years. Finally, the firm's price to earnings growth (PEG) is 4.03, which indicates that it is overvalued in terms of its expected rate of earnings growth.

McDonald's Is the Subject of Mixed Market Indicators :

34 analysts are following McDonald's and have set target prices ranging from $250 to $328 per share. On average, they have given the company a rating of buy. At the current price of $266.84, MCD is trading -7.9% away from its average analyst target price of $289.74 per share, implying an analyst consensus of some upside potential for the stock.

The company has a very low short interest since 0.8% of the company's shares are tied to short positions. Institutions own 70.1% of McDonald's's shares, while the insider ownership rate stands at 0.17%. The biggest shareholder is the Vanguard Group, Inc. with a 9.23% stake in the company worth approximately $18,030,472,747.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.