馃崯 MCDONALD'S CORPORATION: ANALYSIS 馃崯
Copyright: Joel Padilla 2023
McDonald's Corp [MCD] is a great resilient company. Its profits come from 3 segments: food and beverages who sells to stores, franchising, leasing of the properties it owns, and buying and selling of real estate. MCD really needs no more introduction.... People loves it.
In general terms, MCD has showed incredible average margins: Gross margin ± 56%, Operative Margin ± 44% and Net Margin ± 27%. However, its average ROIC was ± 8.78%. If an average PER of 25 is considered and their ROIC as an EPS volatility, the forward price spread could be at:
[+] $255 USD
[±] $234 USD
[-] $214 USD
In other hand, if a forward EV/EBITDA of 20 is considered with an EBITDA increases of 5%, Net Debt increases of 2.5% and Shares Outstanding increases of 0%, the neutral price could be ± $296 USD.
The pros: The food industry has been in a turmoil due to inflation, its customers seem to be loyal, the shares outstanding decreases and it pays dividends. The cons: the debt is high, the ROIC is acceptable but not amazing, it cannot grow exponentially more and if there are a recession, the price could be lateral or fall because trading at a PER 30 [26/04/23] is somewhat risky for not being a growth company.
The best analysis is yours!
In general terms, MCD has showed incredible average margins: Gross margin ± 56%, Operative Margin ± 44% and Net Margin ± 27%. However, its average ROIC was ± 8.78%. If an average PER of 25 is considered and their ROIC as an EPS volatility, the forward price spread could be at:
[+] $255 USD
[±] $234 USD
[-] $214 USD
In other hand, if a forward EV/EBITDA of 20 is considered with an EBITDA increases of 5%, Net Debt increases of 2.5% and Shares Outstanding increases of 0%, the neutral price could be ± $296 USD.
The pros: The food industry has been in a turmoil due to inflation, its customers seem to be loyal, the shares outstanding decreases and it pays dividends. The cons: the debt is high, the ROIC is acceptable but not amazing, it cannot grow exponentially more and if there are a recession, the price could be lateral or fall because trading at a PER 30 [26/04/23] is somewhat risky for not being a growth company.
The best analysis is yours!
Copyright: Joel Padilla 2023
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