McDonald's
MCD
$261.11
-0.92%
McDonald's Corporation is the world's largest restaurant brand, operating over 45,000 locations across more than 100 markets, with a menu spanning burgers, chicken, breakfast, and beverages. The company generates the majority of its revenue from franchise royalties and rent (about 62%), with the remainder from company-operated restaurants across three segments: the United States, international operated markets, and international developmental/licensed markets. As a dominant quick-service restaurant (QSR) player, McDonald's is currently navigating a challenging consumer environment, with recent headlines highlighting its attractive dividend yield after a significant stock pullback and debates over whether the market has overreacted to near-term weakness. The stock is trading near multi-year lows, prompting discussions about a potential value opportunity versus concerns about slowing growth and competitive pressures.…
MCD
McDonald's
$261.11
Related headlines
Investment Opinion: Should I buy MCD Today?
Based on the analysis, MCD is rated a Buy. The stock trades at a forward PE of 19.0x, below its historical average, with a 19% upside to the average analyst target of $315.39. Revenue growth accelerated to 9.4% YoY, and the company maintains a high net margin of 30.4% and strong free cash flow of $7.04B. The dividend yield of 2.8% adds income appeal. However, risks include consumer spending weakness and high leverage. The rating would upgrade if the stock drops below $250 (analyst low target) or if revenue growth exceeds 15%, and downgrade if growth decelerates below 5% or if the forward PE exceeds 25x. Overall, MCD appears undervalued relative to its history and peers, offering a favorable risk/reward.
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MCD 12-Month Price Forecast
The AI assessment leans bullish given the valuation discount, accelerating revenue growth, and strong cash generation. However, the medium confidence reflects the stock's recent downtrend and macro uncertainties. If the company can sustain growth and margins, the stock is likely to re-rate higher. Key developments to watch include same-store sales trends and consumer spending data. A downgrade to neutral would occur if revenue growth falls below 5% or if the stock breaks below $250.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on McDonald's's 12-month outlook, with a consensus price target around $315.39 and implied upside of +20.8% versus the current price.
Average Target
$315.39
0 analysts
Implied Upside
+20.8%
vs. current price
Analyst Count
—
covering this stock
Price Range
$250 - $407
Analyst target range
McDonald's is covered by 31 analysts, with a consensus recommendation of 'Buy' and a mean recommendation score of 2.06 (where 1 is Strong Buy and 5 is Sell). The average target price is $315.39, implying an upside of approximately 19.0% from the current price of $265. The distribution of ratings is not provided, but the consensus leans bullish. The target price range is $250 to $407, with the low target suggesting a potential downside of 5.7% and the high target implying a 53.6% upside. The wide spread between the low and high targets indicates high uncertainty about the company's future performance. Recent institutional ratings have been mostly positive, with firms like Citigroup, KeyBanc, and JP Morgan maintaining Buy or Overweight ratings, while TD Cowen holds a Hold. This suggests that analysts are generally optimistic about McDonald's long-term prospects, but the wide target range reflects concerns about near-term consumer spending and competitive pressures.
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Bulls vs Bears: MCD Investment Factors
McDonald's presents a mixed picture: strong fundamentals with accelerating revenue growth, high margins, and a solid dividend, but the stock is in a downtrend near 52-week lows, with valuation metrics like PEG and debt levels raising concerns. The bull case is supported by a 19% upside to analyst targets and a forward PE near historical lows, while the bear case hinges on continued consumer weakness and competitive pressures. Currently, the evidence slightly favors the bulls given the valuation discount and growth acceleration, but the key tension is whether the recent revenue growth can sustain in a challenging macro environment, which will determine if the stock re-rates higher or continues to slide.
Bullish
- Revenue growth accelerating to 9.4% YoY: Q1 2026 revenue of $6.517B grew 9.4% YoY, up from 4.6% growth in Q1 2025, indicating strong momentum driven by international markets and strategic initiatives.
- Attractive valuation with 19% upside to target: Current price of $265 is 19% below the average analyst target of $315.39, and the forward PE of 19.0x is near the low end of its 5-year range (19.4x-41.5x), suggesting undervaluation.
- High profitability with 30.4% net margin: Net margin of 30.4% in Q1 2026 is robust, supported by a 55.9% gross margin and 46.1% operating margin, reflecting McDonald's franchise model and operational efficiency.
- Strong free cash flow of $7.04B TTM: Free cash flow of $7.04B over the trailing twelve months provides ample capacity for dividends and share buybacks, underpinning shareholder returns.
Bearish
- Stock near 52-week low with -15% 1-year return: MCD is down 15.1% over the past year and trades near its 52-week low of $259.85, reflecting persistent negative momentum and underperformance vs. the S&P 500 (relative strength -33.7%).
- Elevated PEG ratio of 5.3x: The PEG ratio of 5.3x suggests that the market's growth expectations are modest relative to the PE, potentially indicating overvaluation if growth does not accelerate.
- Negative debt-to-equity ratio of -30.6: The negative debt-to-equity ratio indicates high leverage, which could strain financial flexibility if interest rates remain elevated or earnings decline.
- Consumer spending pressures in QSR sector: Rising gas prices and inflation are squeezing consumer wallets, potentially reducing discretionary spending at fast-food chains, as noted in recent news about value-focused dining trends.
MCD Technical Analysis
McDonald's stock is in a clear downtrend, with a 1-year price change of -15.1% and a 6-month change of -22.3%. The current price of $265 is near the 52-week low of $259.85, sitting at approximately 77.6% of the 52-week range (calculated as (265 - 259.85) / (341.75 - 259.85) = 6.3% from the low, but more accurately, it's near the low end). This positioning near the lows suggests bearish momentum and potential value, but also risk of further decline if support fails. The stock has underperformed the S&P 500 significantly, with relative strength of -33.7% over the past year, indicating persistent weakness relative to the broader market.
Beta
0.42
0.42x market volatility
Max Drawdown
-23.8%
Largest decline past year
52-Week Range
$260-$342
Price range past year
Annual Return
-16.7%
Cumulative gain past year
| Period | MCD Return | S&P 500 |
|---|---|---|
| 1m | -3.5% | +2.0% |
| 3m | -4.5% | +1.0% |
| 6m | -20.3% | +11.8% |
| 1y | -16.7% | +18.1% |
| ytd | -13.9% | +11.7% |
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MCD Fundamental Analysis
In the most recent quarter (Q1 2026), McDonald's reported revenue of $6.517 billion, up 9.4% year-over-year, accelerating from the prior year's growth of 4.6% (Q1 2025 revenue was $5.955 billion). This growth was driven by strong performance in the International Developmental Licensed Markets segment, which saw revenue of $610 million, and High-Growth Markets at $3.325 billion, while the U.S. segment contributed $2.583 billion. The company's net income for Q1 2026 was $1.983 billion, up from $1.868 billion in Q1 2025, reflecting a net margin of 30.4%, which is consistent with recent quarters. Gross margin improved to 55.9% from 56.0% a year ago, indicating stable cost management despite inflationary pressures.
Quarterly Revenue
$6.5B
2026-03
Revenue YoY Growth
+9.4%
YoY Comparison
Gross Margin
55.9%
Latest Quarter
Free Cash Flow
$7.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is MCD Overvalued?
Given that McDonald's has positive net income, the primary valuation metric is the price-to-earnings (PE) ratio. The trailing PE is 25.5x, while the forward PE is 19.0x, implying that the market expects significant earnings growth in the next year. This gap suggests that analysts anticipate a recovery in earnings, possibly due to cost savings or revenue growth initiatives. The stock's PS ratio is 8.1x, which is higher than the industry average of 2.5x, indicating a premium valuation on sales. However, McDonald's higher margins and brand strength justify this premium. Historically, the trailing PE has ranged from 19.4x to 41.5x over the past five years, with the current 25.5x sitting below the midpoint, suggesting the stock is trading at a discount to its historical average. The PEG ratio of 5.3x is elevated, implying that the market's growth expectations are modest relative to the PE, which could be a red flag for value investors.
PE
25.5x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 19x~30x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
18.6x
Enterprise Value Multiple
Investment Risk Disclosure
Financial risks include a high debt load, as indicated by a negative debt-to-equity ratio of -30.6, which could amplify earnings volatility if interest rates rise or cash flows weaken. The company's operating margin of 46.1% is strong, but any significant decline in franchisee profitability could pressure royalty income, which constitutes about 62% of revenue. Additionally, the payout ratio of 59.7% leaves limited room for dividend increases if earnings dip, and the current ratio of 0.95 suggests potential liquidity constraints in the short term.
FAQ
Key risks include: 1) Financial risk from high leverage (debt-to-equity of -30.6) and a payout ratio of 59.7%, which could limit dividend growth if earnings decline. 2) Market risk from consumer spending weakness, as rising gas prices and inflation may reduce QSR traffic. 3) Competitive risk from aggressive rivals like Burger King, which is investing $700 million in turnaround efforts. 4) Macro risk from interest rate hikes, which could increase debt costs and compress valuation multiples. The most severe risk is a prolonged consumer downturn, which could push the stock to the analyst low target of $250, a 5.7% downside from current levels.
The 12-month forecast is moderately bullish. The base case (50% probability) sees the stock trading between $280 and $315, aligning with the average analyst target of $315.39. The bull case (30% probability) could push the price to $315-$407 if growth accelerates and sentiment improves. The bear case (20% probability) could see the stock fall to $250-$265 if consumer spending deteriorates. The most likely scenario is a gradual recovery to the $300 level, driven by stable earnings growth and a re-rating of the multiple.
MCD appears undervalued based on its forward PE of 19.0x, which is below the 5-year average of approximately 25x. The PS ratio of 8.1x is higher than the industry average of 2.5x, but this premium is justified by McDonald's superior margins and brand strength. The PEG ratio of 5.3x suggests that growth expectations are modest, which could be a concern, but the overall valuation is attractive relative to history. The market is pricing in a recovery in earnings, as indicated by the gap between trailing and forward PE, and if growth materializes, the stock could re-rate higher.
Yes, MCD is a good buy for investors seeking a blend of income and value. The stock trades at a forward PE of 19.0x, below its historical average, and offers a 19% upside to the average analyst target of $315.39. The dividend yield of 2.8% is attractive, and the company's revenue growth is accelerating at 9.4% YoY. However, the stock is near its 52-week low, so there is downside risk if consumer spending weakens further. It is a good buy for long-term investors who can withstand short-term volatility, but not for those seeking quick gains.
MCD is better suited for long-term investment. The stock has a beta of 0.42, indicating low volatility relative to the market, and offers a growing dividend with a 49-year streak. Its earnings visibility is high due to the franchise model, making it a stable compounder. Short-term traders may find opportunities in the current oversold conditions, but the stock's near-term momentum is negative. For long-term investors, a minimum holding period of 3-5 years is recommended to ride out economic cycles and benefit from dividend growth and potential multiple expansion.