Fundamental analysis of McDonald’s (MCD), June 24, 2017

Description:

McDonald’s is not a small-cap stock, but nevertheless a value proposition that fits into this article.

The company is one of the world’s leading fast food chains with more than 36,000 restaurants around the world.

Valuation:

McDonald’s is not cheap at 28.4 times earnings. Average earnings of the past three years come in at 5.02 which gives a P/E ratio of 30.8. Because of the high Goodwill, the Book value is negative. The company has $1.4 billion in Working capital which means that it is able to pay its short-term bills.

Balance sheet:

The company has a negative equity which in theory means that a shareholder owes money to creditors if the company goes bankrupt. This does not look good.

Free cash flow and dividend:

McDonald’s has a Free Cash Flow of $4.2bn which allows the company to pay out a nice Dividend of $3.61 per share. Furthermore, the company is part of the Dividend Aristocrats which means that they have paid out uninterrupted and increasing dividends over the past 20 years. The dividend yield, on the other hand, is low at 2.3%.

Conclusion:

At $154.64 the McDonald’s stock is too expensive for me.

 If you would like to learn more about fundamental analysis you can do that here.

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