Key takeaways
View moreMcDonald's current valuation appears moderately overvalued based on its EV/EBITDA ratio of 18.84x versus industry average of 18.44x, and significantly elevated EV/Sales ratio of 10.73x versus industry average of 2.88x. While the company's superior margins and strong brand justify some premium, the declining revenue trajectory, consumer pressure on key demographics, and international market challenges suggest the current valuation multiple may not be sustainable.
- McDonald's profitability metrics, such as gross and net profit margins (56.58% and 31.36% respectively as of 2025-03-31), significantly exceed industry averages, indicating a strong competitive advantage.
- Revenue has been declining, with Sales/Revenue decreasing from $6.87 billion in 2024-09-30 to $5.95 billion in 2025-03-31, posing a challenge to overall financial performance.
- The company's debt/EBITDA ratio is 2.8, lower than the industry average of 4.16, but total equity is negative at -$3.45 billion as of 2025-03-31, raising concerns about long-term solvency.
- The McValue platform and menu innovation are critical for driving guest counts and maintaining market share, especially given the pressure on low and middle-income consumers, as highlighted in the 2025-05-01 earnings call.
- McDonald's is focusing on restaurant development, planning to open approximately 2,200 new restaurants globally in 2025, expecting a 2% contribution to Systemwide sales growth.
- The company's stock has underperformed benchmarks like XLC over longer periods, but has shown recent strength compared to peers like CMG and SBUX, indicating a mixed performance in the market.
- Geopolitical and macroeconomic factors, such as the war in the Middle East and inflationary pressures, pose risks to the company's performance, requiring vigilant monitoring and strategic adaptation.
- Analysts have raised concerns about the recent U.S. sales trajectory and the effectiveness of the McValue platform, indicating the need for sharper entry-level price points and innovative marketing strategies.
- The company reaffirmed its full-year 2025 financial targets, but success depends on reversing revenue decline and managing expenses, making strategic execution crucial for future performance.
- Rising international boycotts against U.S. brands pose a potential threat to McDonald's, requiring proactive measures to address consumer concerns and maintain brand reputation.
Evaluation summary
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Company Overview:
- McDonald's Corp. (MCD) operates and franchises restaurants globally, offering a menu of food and beverages tailored to local markets. Approximately 95% of its 43,477 restaurants are franchised.
- Key products include the Big Mac, Quarter Pounder with Cheese, Filet-O-Fish, Chicken McNuggets, and McDonald's Fries, along with beverages and desserts. Revenue is generated primarily through fees from franchised restaurants and sales from company-owned restaurants.
- Benchmarks used for comparative analysis include The Communication Services Select Sector SPDR Fund (XLC). Peers include Chipotle Mexican Grill, Inc. (CMG) and Starbucks Corp. (SBUX).
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Financial Performance:
- McDonald's has experienced declining revenue in recent quarters. Sales/Revenue decreased from $6.87 billion in 2024-09-30 to $5.95 billion in 2025-03-31.
- Despite declining revenue, profitability metrics remain strong. The gross profit margin was 56.58% as of 2025-03-31, significantly higher than the industry average of 22.03%. The net profit margin was 31.36%, also substantially above the industry average of 1.81%.
- Return on Assets (ROA) was 14.86% as of 2025-03-31, much higher than the industry average of 4.69%. Return on Average Total Capital was 24.75%, exceeding the industry average of 12.20%.
- EBIT decreased from $3.20 billion in 2024-09-30 to $2.67 billion in 2025-03-31. Net income also decreased from $2.26 billion to $1.87 billion over the same period.
- The earnings call highlighted that consumer pressure is a key headwind, impacting sales, particularly among low and middle-income consumers in the U.S.
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Operational Efficiency:
- Total current assets increased from $4.21 billion in 2024-06-30 to $4.74 billion in 2025-03-31. Total current liabilities also increased from $3.91 billion to $4.01 billion over the same period.
- Working capital was $727 million as of 2025-03-31, an increase from $295 million in 2024-06-30.
- Net operating cash flow increased from $1.69 billion in 2024-06-30 to $2.43 billion in 2025-03-31.
- Free cash flow to equity was $1.88 billion as of 2025-03-31. The free cash flow margin was 0.32, indicating efficient cash generation relative to sales.
- Total capital expenditure was $551 million as of 2025-03-31. Depreciation, depletion, and amortization were $520 million.
- Cash dividends paid were $1.27 billion as of 2025-03-31.
- The current ratio was 1.18 as of 2025-03-31, slightly below the industry average of 1.21. The quick ratio was 1.17, slightly above the industry average of 1.13.
- Total debt was $52.76 billion as of 2025-03-31. The debt/EBITDA ratio was 2.8, lower than the industry average of 4.16. Total equity was negative at -$3.45 billion.
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Growth Opportunities:
- McDonald's is focusing on restaurant development and modernizing its ways of working, as outlined in its "Accelerating the Arches" growth strategy.
- The company plans to open approximately 2,200 new restaurants globally in 2025, expecting net restaurant unit expansion to contribute around 2% to Systemwide sales growth.
- Strategic initiatives include menu innovation, such as the McCrispy Chicken Strips, and digital investments to enhance the customer experience.
- The company is testing new beverage options inspired by CosMc's to understand consumer preferences and expand its beverage offerings.
- The earnings call highlighted the success of the Minecraft Movie marketing campaign, demonstrating the effectiveness of combining digital experiences with in-store collectibles.
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Recent Developments and Market Sentiment:
- The earnings call on 2025-05-01 revealed that McDonald's performance is significantly impacted by pressure on low and middle-income consumers, particularly in the U.S.
- The McValue platform, especially the $5 Meal Deal, is critical for driving guest counts and maintaining market share.
- The company is focusing on menu innovation and marketing campaigns to drive incrementality and overall growth.
- New category-focused teams (beef, chicken, beverages) are designed to enhance competitiveness against specialist competitors.
- International markets show varied performance, with Europe facing inflationary pressures and China showing signs of stabilization.
- Analysts raised concerns about the recent U.S. sales trajectory, the effectiveness of the McValue platform, and the impact of menu pricing increases.
- There are also concerns about rising international boycotts against U.S. brands and their potential impact on McDonald's.
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Risks and Threats:
- Key risks include failure to successfully execute the company's business strategies and evolve with changing consumer preferences.
- The company faces risks associated with its global operations, including geopolitical, regulatory, and supply chain disruptions.
- Challenges with labor availability and costs, and potential reputational harm from workplace practices, pose threats.
- Cybersecurity risks and potential system failures or data breaches are also significant concerns.
- The SEC filings mention various legal proceedings related to competitors, customers, employees, franchisees, government agencies, intellectual property, and suppliers.
- The earnings call highlighted the challenging macroeconomic environment and its impact on the QSR industry.
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Valuation Analysis:
- The Enterprise Value to EBITDA ratio was 18.84 as of 2025-03-31, compared to the industry average of 18.44.
- The Enterprise Value to Sales ratio was 10.73, significantly higher than the industry average of 2.88.
- These valuation metrics suggest that McDonald's is relatively highly valued compared to its sales, but in line with its EBITDA compared to the industry.
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Price Performance:
- McDonald's Corp. (MCD) has shown mixed performance compared to Chipotle Mexican Grill, Inc. (CMG) and Starbucks Corp. (SBUX). Over the past year, MCD has outperformed both CMG and SBUX, with a 1-year return of 21.89% compared to CMG's -25.36% and SBUX's 17.53%.
- McDonald's Corp. (MCD) has generally underperformed The Communication Services Select Sector SPDR Fund (XLC) over the 1-month, 3-month, 1-year, 2-year, and 3-year periods. For example, over the last three years, MCD returned 35.38% compared to XLC's 91.91%.
- The stock price has fluctuated between approximately $319 and $285 between May and July 2025.
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Future Outlook:
- McDonald's reaffirmed its full-year 2025 financial targets outlined in February.
- Foreign currency translation is now expected to be a tailwind of approximately $0.05 per share.
- The company remains cautious about consumer sentiment but is confident in its ability to deliver long-term profitable growth.
- Management emphasized the importance of value and affordability, operational execution, and menu innovation.
- The success of strategic initiatives, such as the McValue platform and menu innovations, will be crucial for driving future performance.
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Summary:
- McDonald's is a global restaurant company with strong profitability metrics but faces challenges in revenue growth and increasing long-term debt.
- Strengths include a well-established brand, efficient operations, and strong cash generation. Weaknesses include declining revenue and negative equity.
- Opportunities include market expansion, menu innovation, and digital investments. Threats include increasing competition, macroeconomic uncertainty, and geopolitical risks.
- The company's financial health is stable, but its ability to sustain performance depends on reversing the revenue decline and controlling expenses.
- Critical factors for future performance include the success of strategic initiatives, management of debt levels, and adaptation to changing consumer preferences.
- Areas requiring further monitoring include revenue trends, operating expenses, debt levels, and the impact of strategic initiatives on profitability.
- McDonald's presents a conservative investment profile with moderate growth potential balanced against identified risks. The company's position relative to industry trends and recent developments suggests a need for proactive adaptation and strategic execution to maintain its competitive edge. Potential catalysts include successful menu innovations and effective marketing campaigns, while headwinds include macroeconomic pressures and geopolitical risks. Overall, McDonald's offers a stable investment with moderate growth prospects, but requires careful monitoring of key performance indicators and strategic initiatives.
Price history
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Fundamentals
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Insights
- McDonald's is facing challenges in revenue growth, which is impacting its profitability, as evidenced by the decreasing trends in sales/revenue, EBIT, and net income.
- While profitability metrics are significantly higher than industry averages, increasing operating expenses and volatile unusual expenses are concerns that need to be addressed.
- The company's liquidity position is reasonable, but the increasing long-term debt and negative equity position raise concerns about long-term solvency.
- McDonald's demonstrates efficient operations and strong cash generation, but its ability to sustain these levels will depend on reversing the revenue decline and controlling expenses.
- Strategic initiatives, such as menu innovation and digital investments, are crucial for driving revenue growth and improving profitability in the face of increasing competition and evolving consumer preferences.
Analysis
- Revenue
- Revenue has been decreasing, indicating potential challenges in maintaining or growing sales volume.
- The most recent sales/revenue was below the average of the previous 8 quarters.
- The 3-year CAGR is slightly lower than the 5-year CAGR, indicating a slight deceleration in revenue growth.
- Profitability
- Profitability metrics, such as gross profit margin, net profit margin, and EBITDA margin, are significantly higher than the industry averages, demonstrating superior profitability.
- However, EBIT and net income have been decreasing, reflecting the impact of declining revenue and increasing operating expenses.
- The trend in EBITDA margin has been decreasing, indicating potential margin compression.
- Liquidity
- The current ratio is slightly below the industry average, suggesting a slightly lower ability to meet short-term obligations compared to peers.
- The quick ratio is slightly above the industry average, indicating a good ability to meet short-term obligations with the most liquid assets.
- Cash and short-term investments have decreased, potentially impacting immediate liquidity.
- Solvency
- The debt/EBITDA ratio is lower than the industry average, indicating lower leverage compared to peers.
- However, long-term debt has been steadily increasing, which could pose a risk if not managed effectively.
- Total equity remains negative, primarily due to accumulated deficit.
- Operational Efficiency
- The company demonstrates efficient operations, as indicated by the high EBITDA margin.
- Return on average assets, return on average total capital, and return on average invested capital are all significantly greater than the industry average, indicating efficient asset and capital utilization.
- However, the increasing selling, general, and administrative expenses could be a concern if not offset by revenue growth or cost efficiencies.
- Cash Flow Analysis - Net operating cash flow is trending downwards, driven by a decrease in net income. - Capital expenditures remain a significant use of cash, reflecting investments in restaurant development and modernization efforts. - The free cash flow margin is strong, indicating efficient cash generation relative to sales.
- Risk Factors
- The decreasing revenue trend suggests that McDonald's may be facing challenges in attracting and retaining customers, possibly due to increased competition or changing consumer preferences.
- The increasing long-term debt raises concerns about long-term solvency, requiring careful monitoring of debt levels and interest coverage ratios.
- Unusual expenses are adding volatility to the company's earnings, making it difficult to assess sustainable profitability.
- Future Outlook
- Future performance will depend on the company's ability to reverse the revenue decline and control operating expenses.
- Key metrics to monitor include revenue growth, gross margin, operating margin, net margin, debt-to-equity ratio, interest coverage ratio, and free cash flow.
- The impact of strategic initiatives on revenue and profitability should be closely watched.
- Profitability
Financial statements
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Public filings
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- McDonald's has a strong global brand and franchise-focused business model that generates stable and predictable revenue, but faces increasing competition and evolving consumer preferences that require the company to continuously adapt its strategies
- The company is making significant investments in digital, delivery, and drive-thru capabilities to enhance the customer experience and drive long-term growth, while also modernizing its internal operations through initiatives like "Accelerating the Organization"
- Geopolitical and macroeconomic factors, such as the war in the Middle East and inflationary pressures, have negatively impacted the company's performance in certain markets, highlighting the importance of its global diversification
- Key risks include the company's ability to protect its brand and intellectual property, manage complex legal and regulatory environments, and mitigate operational risks like supply chain disruptions, labor challenges, and cybersecurity threats
- Overall, McDonald's appears to be taking proactive steps to strengthen its competitive position and adapt to industry changes, but faces an evolving set of risks that will require continued vigilance and execution of its strategic initiatives
Core Business and Operations:
- McDonald's is a global restaurant company that franchises and operates McDonald's restaurants in over 100 countries
- The company's restaurants serve a locally relevant menu of quality food and beverages, with approximately 95% of the 43,477 restaurants at the end of 2024 being franchised
- The company operates under three reportable segments: U.S., International Operated Markets, and International Developmental Licensed Markets & Corporate
- McDonald's generates revenue primarily through fees from franchised restaurants and sales from company-owned and operated restaurants
Industry and Market Trends:
- The company operates in the highly competitive informal eating out (IEO) segment, facing competition from traditional quick-service restaurants as well as non-traditional competitors like convenience stores and online retailers
- The company is impacted by evolving consumer preferences, industry trends, and regulatory changes in the markets it operates in globally
- The COVID-19 pandemic and the war in the Middle East have negatively impacted the company's operations and financial performance in certain markets
Recent Events:
- The company announced an evolution of its "Accelerating the Arches" growth strategy in 2023, which includes a focus on restaurant development and modernizing its ways of working
- In 2024, the company acquired McDonald's business in Israel and divested its business in South Korea
- The company has been investing in digital initiatives, delivery, and drive-thru to enhance the customer experience
Risk Factors:
- Failure to successfully execute the company's business strategies and evolve with changing consumer preferences and industry trends
- Risks associated with the global scope of operations, including geopolitical, regulatory, and supply chain disruptions
- Challenges with labor availability and costs, and potential reputational harm from workplace practices
- Cybersecurity risks and potential system failures or data breaches
- Legal and regulatory complexities, including litigation and changes in tax laws
Legal Matters:
- The company is subject to various legal proceedings related to competitors, customers, employees, franchisees, government agencies, intellectual property, and suppliers
- The company is also subject to government regulations in areas such as advertising, franchising, health, safety, and employment
Management's Discussion and Analysis:
- Global comparable sales decreased 0.1% in 2024, with mixed performance across the company's segments
- Consolidated revenues increased 2% in 2024, while Systemwide sales increased 1%
- Operating income increased 1% in 2024, with the company's heavily franchised business model generating stable and predictable revenue
- The company has a strong cash flow profile and has been investing in restaurant development, technology, and digital initiatives to drive long-term growth
- The company expects net restaurant unit expansion to contribute around 2% to Systemwide sales growth in 2025 and plans to open approximately 2,200 new restaurants globally
Earnings calls
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Earnings Report 2025Q1 (2025-05-01)
Key takeaways
- Consumer Pressure is a Key Headwind: McDonald's performance is significantly impacted by pressure on low and middle-income consumers, particularly in the U.S., making value offerings crucial.
- Value Platform is Essential for Market Share: The McValue platform, especially the $5 Meal Deal, is critical for driving guest counts and maintaining market share in a challenging environment.
- Menu Innovation and Marketing are Vital: Combining strong value programs with innovative menu items and effective marketing campaigns is essential for driving incrementality and overall growth.
- Category Focus Aims to Improve Competitiveness: The new category-focused teams (beef, chicken, beverages) are designed to enhance competitiveness against specialist competitors by driving innovation and efficiency.
- International Markets Show Varied Performance: While the U.S. faces specific challenges, international markets exhibit mixed performance, with Europe facing inflationary pressures and China showing signs of stabilization.
- Operational Excellence Remains a Priority: Maintaining operational excellence, including speed of service and customer satisfaction, is crucial for success, especially with increased menu complexity.
- The UK Market Requires Focused Attention: The UK market is underperforming and requires focused attention to improve execution and regain market share.
Focus of management’s prepared remarks
- Challenging Macroeconomic Environment: Acknowledged the difficult conditions for the QSR industry in 2025 due to macroeconomic uncertainty, geopolitical tensions, and pressures on consumer spending.
- Focus on Value and Affordability: Highlighted the importance of leadership in value and affordability, with the expansion and refinement of value propositions to meet consumer needs, especially among low and middle-income cohorts.
- McValue Platform: Introduced the McValue platform in the U.S. as a new branded equity similar to successful value menus in other markets, emphasizing everyday affordable price menus (EDAP) and entry-level meal bundles.
- Marketing and Menu Innovation: Emphasized the combination of value platforms, innovative new products, and world-class marketing campaigns to attract customers and provide feel-good moments.
- Minecraft Movie Campaign: Highlighted the success of the Minecraft Movie marketing campaign, noting the strong consumer response and the combination of digital experiences with in-store collectibles.
- McCrispy Chicken Strips: Mentioned the nationwide launch of McCrispy Chicken Strips in the U.S. as a contributor to growth.
- Global Restaurant Experience Team: Introduced the creation of McDonald's Global Restaurant Experience Team to execute faster, scale cross-functional product innovations, and develop tech innovations.
- Category Structure: Highlighted the new category structure with dedicated leaders for beef, chicken, and beverages to bring a specialist focus to McDonald's.
- CosMc's Learnings: Shared learnings from the CosMc's test, informing the understanding of consumers' customization preferences and interests in new beverage categories.
- Beverage Test: Announced a beverage test in existing U.S. McDonald's restaurants, incorporating new menu items inspired by CosMc's.
- Leadership Changes: Announced leadership changes, including Jill McDonald leading the Restaurant Experience Team, Manu Steijaert as President of IOM, Jo Sempels assuming responsibility for McDonald's France, and Dario Baroni as IDL President.
- Reaffirming 2025 Financial Targets: Reaffirmed the full-year 2025 financial targets outlined in February.
- Accelerating the Arches Strategy: Reiterated commitment to the Accelerating the Arches growth strategy, focusing on value, menu innovation, restaurant experience, and values.
- 70th Anniversary: Marked McDonald's 70th anniversary, honoring leadership in innovation, menu advancement, and digital transformation.
Focus of the analyst Q&A
- U.S. Sales Trajectory and Momentum:
- Questions about the recent U.S. sales trajectory and underlying momentum, considering the pressured consumer and abating headwinds.
- Inquiries about the impact of marketing and menu news on future performance.
- International Market Dynamics:
- Focus on consumer economic dynamics and McDonald's value perception in key IOM countries compared to the U.S.
- Interest in the firmness of the consumer backdrop in overseas markets.
- McValue Platform Performance:
- Questions about the current construct of the McValue platform and its effectiveness in the current environment.
- Concerns about the need for sharper entry-level price points on the value menu.
- Menu Pricing and Mix Shift:
- Inquiries about the impact of continued menu pricing increases on the value platform and potential negative mix shift.
- Exploration of innovation as a way to introduce lower-priced items.
- U.S. Same-Store Sales and Margins:
- Questions about whether moderate U.S. same-store sales growth still holds for 2025, given Q1 performance and consumer caution.
- Inquiries about expectations for 2025 U.S. McOpCo margins.
- UK Market Performance:
- Concerns about whether the UK is gaining market share and the role of new competition.
- QSR Traffic Declines:
- Questions about whether declines in QSR traffic are due to shifts to other segments like fast casual or full service.
- Beverage Test Expansion:
- Inquiries about the beverage test expansion, including expectations, investments, positioning, and margin potential.
- Core Menu Pricing Certainty:
- Concerns about the lack of price certainty around the core menu and whether it presents an opportunity or a risk.
- Boneless Chicken Market:
- Questions about the expected success rate of the McCrispy Chicken Strips compared to previous offerings, given changes in the competitive market.
- U.S. Consumer Segmentation:
- Inquiries about performance across low, middle, and high-income consumers, including market share and value mix.
- Questions about regional and daypart performance.
- Value Launch Impact:
- Questions about how the value launch has evolved the mix of value going through the mobile platform.
- International Boycotts:
- Concerns about rising international boycotts against U.S. brands and their potential impact on McDonald's.
- Marketing and Innovation Pipeline:
- Questions about whether there is enough in the marketing and innovation pipeline on the premium side to drive a more sustainable lift in sales.
- Operational Capacity:
- Concerns about the capacity of restaurant teams to handle new menu items without impacting speed of service.
Summary
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Financial Performance
McDonald's reported a challenging first quarter in 2025, with global comparable sales declining by 1% (essentially flat excluding the Leap Day impact). Adjusted earnings per share were $2.67, including a $0.04 headwind from foreign currency translation, representing a 1% increase in constant currencies compared to the prior year. The U.S. saw a 3.6% decline in comp sales. International Operated Markets (IOM) also experienced a 1% decline in comp sales, while International Developmental Licensed Markets (IDL) increased by 3.5%. Despite top-line pressures, the company generated over $3.3 billion in restaurant margins, with an adjusted operating margin of approximately 45.5%.
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Revenue Drivers
Revenue was primarily impacted by broad-based consumer challenges, particularly among lower and middle-income cohorts in the U.S. and similar softening consumer sentiment in major international markets. The launch of the McValue platform, including the $5 Meal Deal, and marketing campaigns like the Minecraft Movie promotion, aimed to drive traffic and improve guest counts. Menu innovation, such as the McCrispy Chicken Strips, is expected to contribute to growth. In China, increased delivery share and the success of value meals drove performance.
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Profit Margins and Cost Management
The adjusted operating margin was 45.5%. Lower company-operated margins reflected pressured top-line results and commodity inflation, particularly in Europe. This was partially offset by lower G&A spend due to the timing of investments and comparison to prior-year costs related to the biannual worldwide convention. The company remains focused on optimizing run-the-business spending while investing in strategic growth priorities like digital technology and global business services.
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Guidance and Outlook
McDonald's reaffirmed its full-year 2025 financial targets outlined in February, including the impact from tariffs. Foreign currency translation is now expected to be a tailwind of approximately $0.05 per share, a significant change from the previous estimated headwind. The company remains cautious about consumer sentiment but is confident in its ability to deliver long-term profitable growth.
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Strategic Initiatives
Key strategic initiatives include sustaining leadership in value and affordability, strengthening customer taste perceptions through new category teams (beef, chicken, beverages), ensuring feel-good restaurant experiences, and leading with values. The creation of the Global Restaurant Experience Team aims to accelerate execution and scale cross-functional product innovations. A beverage test inspired by CosMc's will be launched in existing U.S. McDonald's restaurants.
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Management Commentary
Management acknowledged the challenging macroeconomic environment and its impact on the QSR industry. They emphasized the importance of value and affordability, operational execution, and menu innovation. CEO Chris Kempczinski expressed confidence in the company's ability to outperform competitors by leveraging its brand strength and global scale. He highlighted the resilience of the three-legged stool (franchisees, crew, and supply chain) and the company's commitment to local communities.
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Industry and Market Conditions
The QSR industry is facing macroeconomic uncertainty and pressures on consumers, with geopolitical tensions adding to the economic uncertainty. Industry traffic fell more than anticipated in several large markets, including the U.S., particularly among low and middle-income consumers. The company noted a divided U.S. economy, with high-income consumers remaining solid while lower and middle-income consumers are weighed down by inflation and economic anxiety.
Comparative analysis
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Benchmarks (as of 2025-06-13)
The Communication Services Select Sector SPDR Fund (XLC)
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Performance Comparison:
- McDonald's Corp. (MCD) has generally underperformed The Communication Services Select Sector SPDR Fund (XLC) over the 1-month, 3-month, 1-year, 2-year, and 3-year periods. For example, over the last three years, MCD returned 35.38% compared to XLC's 91.91%, a significant underperformance of 56.53%. However, MCD outperformed XLC over the 6-month period, returning 2.57% compared to 1.8%. Year-to-date, MCD has underperformed XLC, with returns of 4.4% and 5.76% respectively.
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Risk and Return Analysis:
- The annualized returns show that McDonald's Corp. (MCD) has provided lower returns compared to The Communication Services Select Sector SPDR Fund (XLC) over the 2-year and 3-year periods. For instance, the 3-year annualized return for MCD is 10.62%, while for XLC it is 24.27%.
- McDonald's Corp. (MCD) has consistently exhibited lower annualized volatility compared to The Communication Services Select Sector SPDR Fund (XLC) throughout the observed period. This indicates that MCD's returns were generally more stable compared to XLC.
- The maximum drawdown for McDonald's Corp. (MCD) was -17.21% on 2024-07-09, while for The Communication Services Select Sector SPDR Fund (XLC) it was -46.65% on 2022-11-03. This indicates that XLC experienced significantly larger peak-to-trough declines than MCD, suggesting a higher risk profile.
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Risk-Adjusted Performance:
- The Sharpe ratios for McDonald's Corp. (MCD) were generally positive, indicating favorable risk-adjusted returns, while The Communication Services Select Sector SPDR Fund (XLC) had negative Sharpe ratios for a significant portion of the observed period, suggesting less favorable risk-adjusted returns. Recently, XLC's Sharpe ratios have improved and are generally higher than MCD's, suggesting better recent risk-adjusted performance.
- McDonald's Corp. (MCD) has a lower risk profile compared to The Communication Services Select Sector SPDR Fund (XLC), as indicated by its beta values consistently below 1. This suggests that MCD is less sensitive to market movements compared to XLC.
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Overall Assessment:
- McDonald's Corp. (MCD) has shown a trend of lower returns but also lower volatility and drawdowns compared to The Communication Services Select Sector SPDR Fund (XLC). While XLC has demonstrated higher potential returns, it comes with significantly higher risk as evidenced by its larger drawdowns and higher beta values. The Sharpe ratio analysis indicates that MCD has historically offered better risk-adjusted returns, but XLC has shown recent improvements. Investors seeking stability and lower risk may prefer MCD, while those willing to accept higher risk for potentially higher returns may opt for XLC.
Peers Price History(as of 2025-06-13)
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Performance Comparison:
- McDonald's Corp. (MCD) has shown mixed performance compared to Chipotle Mexican Grill, Inc. (CMG) and Starbucks Corp. (SBUX). Over the past year, MCD has outperformed both CMG and SBUX, with a 1-year return of 21.89% compared to CMG's -25.36% and SBUX's 17.53%. However, over longer periods like 2 and 3 years, MCD has underperformed CMG but outperformed SBUX. For example, over 3 years, MCD returned 35.38% compared to CMG's 98.4% and SBUX's 34.87%.
- The consistency of MCD's performance varies. While it has shown strong recent performance, its longer-term returns have been less impressive compared to CMG.
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Risk and Return Analysis:
- McDonald's Corp. (MCD) has provided lower annualized returns compared to Chipotle Mexican Grill, Inc. (CMG) over 2 and 3-year periods but higher returns over the past year. For instance, the 3-year annualized return for MCD is 10.62%, while CMG's is 25.65%.
- McDonald's Corp. (MCD) is less volatile than Chipotle Mexican Grill, Inc. (CMG) and Starbucks Corp. (SBUX). MCD's annualized volatility generally ranges from 8.26% to 28.86%, while CMG's ranges from 12.65% to 48.82% and SBUX's ranges from 14.07% to 80.09%.
- McDonald's Corp. (MCD) has a maximum drawdown of -17.21%, which is significantly less than Chipotle Mexican Grill, Inc. (CMG) at -37.52% and Starbucks Corp. (SBUX) at -42.57%. This indicates a lower risk profile for MCD.
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Risk-Adjusted Performance:
- McDonald's Corp. (MCD) has a lower Sharpe Ratio compared to Chipotle Mexican Grill, Inc. (CMG) but generally higher than Starbucks Corp. (SBUX). This suggests that CMG offers better risk-adjusted returns.
- McDonald's Corp. (MCD) has a beta consistently below 1, indicating lower sensitivity to market movements compared to Chipotle Mexican Grill, Inc. (CMG) and Starbucks Corp. (SBUX). As of Q2 2025, MCD has a beta of 0.22, CMG has a beta of 0.86, and SBUX has a beta of 1.04.
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Overall Assessment:
- McDonald's Corp. (MCD) presents a more conservative investment profile compared to Chipotle Mexican Grill, Inc. (CMG) and Starbucks Corp. (SBUX). While MCD's recent performance is strong, its longer-term returns are moderate. Its lower volatility and smaller drawdowns suggest a lower-risk investment.
- Chipotle Mexican Grill, Inc. (CMG) offers higher potential returns but comes with higher volatility and greater drawdowns. Starbucks Corp. (SBUX) has shown mixed performance and higher volatility, making it a riskier investment compared to MCD.
- A significant trend is the recent decrease in beta for CMG and SBUX, indicating reduced market sensitivity. MCD's consistently low beta reinforces its defensive nature.
Peers Fundamentals(as of 2025-03-31)
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Market Position and Size:
- McDonald's (MCD) stands out with a significantly larger market capitalization of $223,073.86 million compared to Chipotle (CMG) at $69,469.88 million and Starbucks (SBUX) at $96,241.72 million.
- MCD's revenue of $25,707.0 million is substantial, though less than SBUX's $36,319.1 million. Its EBITDA of $13,482.0 million and Net Income of $8,162.0 million are the highest among its peers.
- This indicates MCD holds a leading position in the restaurant industry, reflecting a well-established brand and extensive global operations.
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Profitability and Efficiency:
- MCD demonstrates superior profitability with a Gross Profit Margin of 55.73%, EBITDA Margin of 52.44%, and Net Profit Margin of 31.75%. These margins significantly exceed those of CMG and SBUX, as well as the industry average.
- CMG's Gross Profit Margin is 23.42%, EBITDA Margin is 20.62%, and Net Profit Margin is 13.59%. SBUX has a Gross Profit Margin of 18.8%, EBITDA Margin of 16.48%, and Net Profit Margin of 8.62%. The industry average for Gross Profit Margin is 22.03%, EBITDA Margin is 12.38%, and Net Profit Margin is 1.81%.
- MCD's high profitability suggests efficient operations and strong brand pricing power.
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Financial Health and Stability:
- Unfortunately, key financial ratios such as Current Ratio, Quick Ratio, Total Debt to Total Equity Ratio, and Debt/EBITDA are missing for MCD, making a complete assessment of its financial health challenging.
- CMG has a Current Ratio of 1.52 and a Quick Ratio of 1.48, indicating strong liquidity. Its Total Debt to Total Equity Ratio is 132.72, lower than the industry average of 436.07, suggesting it is less leveraged.
- SBUX has a Current Ratio of 0.64 and a Quick Ratio of 0.45, which are below the industry average, indicating potential liquidity concerns.
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Valuation and Market Perception:
- MCD has a Price to Earnings (P/E) ratio of 27.52, lower than CMG's 45.3 and SBUX's 30.78, as well as the industry average of 51.97. This suggests MCD may be undervalued relative to its earnings.
- MCD's Price to Sales (P/S) ratio of 8.72 is higher than CMG's 6.11, SBUX's 2.66, and the industry average of 2.25, indicating a premium valuation based on sales.
- The market appears to perceive MCD as a stable, mature company with reliable earnings.
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Cash Flow and Capital Management:
- MCD's Net Income is $8,162.0 million. CMG has a Net Operating Cash Flow of $2,092.92 million, Total Capital Expenditure of $605.71 million, and Free Cash Flow of $1,487.21 million. SBUX has a Net Operating Cash Flow of $5,569.7 million, Total Capital Expenditure of $2,804.6 million, and Free Cash Flow of $2,765.1 million.
- SBUX generates more cash flow from operations than CMG, but also has higher capital expenditures.
- Without MCD's cash flow figures, a direct comparison is not possible.
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Growth and Future Prospects:
- MCD's growth rates are generally lower than its peers. Its most recent year-over-year growth in Sales/Revenue (-0.22%), EBITDA (-1.94%), and Net Income (-5.04%) are all significantly below the peer averages.
- MCD's 3-year and 5-year CAGR figures are also lower than the peer group averages, indicating it is losing ground to its competitors in terms of long-term growth.
- This suggests MCD's future prospects may be limited compared to its higher-growth peers.
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Potential for Investment:
- MCD may be an attractive investment for risk-averse investors seeking stable returns due to its high profitability, market dominance, and reasonable valuation based on earnings.
- However, its lower growth rates and premium valuation based on sales raise concerns about its long-term growth potential.
- Investors should weigh MCD's stability against its limited growth prospects compared to peers like CMG and SBUX.
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Key Risks and Considerations:
- MCD's lower growth rates compared to peers pose a risk to its long-term market share and competitive position.
- The absence of key financial data makes it difficult to fully assess MCD's financial health and stability.
- Its high Price to Sales ratio suggests a premium valuation, which may not be sustainable if growth does not improve.
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Overall Assessment:
- MCD is a financially strong and highly profitable company with a dominant market position.
- However, its growth is lagging behind its peers, and the absence of key financial data raises concerns about its long-term prospects.
- Investors should carefully consider MCD's stability and profitability against its limited growth potential compared to its higher-growth peers.
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