Mcdonalds Corp (NYSE: MCD)

Sector: Consumer Cyclical Industry: Restaurants CIK: 0000063908
Market Cap 346.46 Bn
P/B 23.97
P/E 68.40
P/S 14.10
ROIC (Qtr) 17.52
Div Yield % 1.28
Rev 1y % (Qtr) 2.98
Total Debt (Qtr) 55.82 Bn
Debt/Equity (Qtr) -25.81
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About

Investment thesis

Bull case

  • Operating cash flow of 10.48B provides strong 60.96x coverage of stock compensation 172M, indicating sustainable incentive practices.
  • Strong operating cash flow of 10.48B provides 4.20x coverage of SG&A expenses 2.50B, showing efficient operational cost management.
  • Robust free cash flow of 7.50B exceeds capital expenditure of 2.98B by 2.51x, indicating strong organic growth funding capability.
  • Tangible assets of 57.30B provide exceptional 61.22x coverage of deferred revenue 936M, showing strong service capability backing.
  • Operating cash flow of 10.48B provides strong 11.20x coverage of deferred revenue 936M, indicating service delivery capability.

Bear case

  • Operating cash flow of 10.48B barely covers its investment activities of (3.49B), with a coverage ratio of -3, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 10.48B provides thin coverage of dividend payments of (5.06B) with a -2.07 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • High receivables of 2.58B relative to inventory of 55M (46.89 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Retained earnings of 69.44B provide limited buffer against comprehensive income items of (2.41B), which is -28.77x, indicating elevated exposure to market risks.
  • Operating cash flow of 10.48B is outpaced by equity issuance of (1.69B) (-6.19 ratio), indicating concerning reliance on equity markets for funding operations.

Peer comparison

Companies in the Restaurants
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 MCD Mcdonalds Corp 346.46 Bn 68.40 14.10 55.82 Bn
2 SBUX Starbucks Corp 139.76 Bn 47.22 6.36 25.47 Bn
3 CMG Chipotle Mexican Grill Inc 50.59 Bn 32.94 4.24 5.08 Bn
4 YUM Yum Brands Inc 45.22 Bn 31.73 5.84 11.55 Bn
5 DRI Darden Restaurants Inc 28.92 Bn 43.38 4.50 6.41 Bn
6 QSR Restaurant Brands International Inc. 22.20 Bn 24.07 2.40 15.64 Bn
7 DPZ Dominos Pizza Inc 21.88 Bn 221.01 13.28 -
8 YUMC Yum China Holdings, Inc. 20.52 Bn 22.69 1.77 1.84 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 5.87 2.21
EV to Cash from Ops. EV/CFO 54.94 312.98
EV to Debt EV to Debt 6.37 5.62
EV to EBIT EV/EBIT 46.77 3.91
EV to EBITDA EV/EBITDA 39.85 21.20
EV to Free Cash Flow [EV/FCF] EV/FCF 84.07 45.95
EV to Market Cap EV to Market Cap 1.03 2.53
EV to Revenue EV/Rev 14.47 3.79
Price to Book Value [P/B] P/B 23.97 0.71
Price to Earnings [P/E] P/E 68.40 29.80
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 1.66 -9.75
Dividend Payout Ratio % Div Payout % (Qtr) 60.10 21.96
Dividend per Basic Share Div per Share (Qtr) 7.08 0.94
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 67.30 34.43
Interest Coverage Int. cover (Qtr) 7.88 -92.90
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -13.33 -26.40
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 97.62 32.62
Dividend Growth (1y) % Div 1y % (Qtr) 5.99 3.33
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 2.19 -129.85
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 4.35 -17.63
EBIT Growth (1y) % EBIT 1y % (Qtr) 3.57 6.64
EBT Growth (1y) % EBT 1y % (Qtr) 3.44 -48.75
EPS Growth (1y) % EPS 1y % (Qtr) 2.97 -142.91
FCF Growth (1y) % FCF 1y % (Qtr) 12.44 11.75
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 4.23 24.30
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.43 1.02
Cash Payout Ratio Cash Payout (Qtr) 0.38 0.09
Cash Ratio Cash Ratio (Qtr) 0.40 0.80
Current Ratio Curr Ratio (Qtr) 1.00 1.56
Debt to Equity Ratio Debt/Equity (Qtr) -25.81 0.61
Interest Cover Ratio Int Coverage (Qtr) 7.88 -92.90
Times Interest Earned Times Interest Earned (Qtr) 7.88 -92.90
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 54.80 8.16
EBIT Margin % EBIT Margin % (Qtr) 46.56 -2.09
EBT Margin % EBT Margin % (Qtr) 40.65 -0.93
Gross Margin % Gross Margin % (Qtr) 59.40 34.54
Net Profit Margin % Net Margin % (Qtr) 32.00 -2.80