McDonald's
MCD
$272.61
-0.72%
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. As a dominant quick-service chain, it generates roughly 62% of revenue from franchise royalties and rent, giving it a highly franchised, asset-light business model that produces consistent cash flows. The current investor narrative centers on a sharp 20% pullback from 52-week highs, which has pushed the dividend yield to an attractive 2.8% and sparked debate about whether the stock is a value opportunity or facing structural headwinds from consumer weakness and rising competition.…
MCD
McDonald's
$272.61
Related headlines
Investment Opinion: Should I buy MCD Today?
Rating: Buy. Thesis: McDonald's is a high-quality, defensive business trading at a compelling forward P/E of 19.32x, near the low end of its historical range, with a 2.8% dividend yield and strong analyst support. The current price offers a favorable risk/reward for long-term investors. Supporting Evidence: The forward P/E of 19.32x is below the five-year average of ~25x, implying a 24% discount to its historical valuation. Revenue grew 9.72% YoY in Q4 2025, and net margin of 31.85% is double the industry average. Free cash flow of $7.186 billion provides ample coverage for dividends and buybacks. Analyst consensus is Buy with no sell ratings, and the average EPS estimate of $17.40 implies a forward P/E of 15.8x on the low estimate, suggesting further upside. Risks & Conditions: The biggest risks are further revenue deceleration below 8% growth and a break below the 52-week low of $264.53, which could trigger stop-loss selling. If the forward P/E compresses below 17x, the stock would be a stronger buy; if revenue growth falls below 5%, the rating would be downgraded to Hold. Overall, McDonald's is fairly valued relative to its history but undervalued relative to its earnings power and cash flow generation.
Sign up to view all
MCD 12-Month Price Forecast
McDonald's offers a compelling risk/reward at current levels. The forward P/E of 19.32x is near the low end of its historical range, providing a margin of safety. While revenue growth is decelerating, the company's asset-light model generates industry-leading margins and robust free cash flow. The 2.8% dividend yield and 49-year dividend growth streak add to the total return potential. The primary risk is a further deterioration in consumer spending, which could pressure same-store sales and margins. However, the low beta and defensive nature of the business make it a suitable holding for long-term investors. I would upgrade to a more bullish stance if revenue growth reaccelerates above 10% or if the forward P/E drops below 18x. Conversely, a break below the 52-week low would warrant a downgrade to neutral.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on McDonald's's 12-month outlook, with a consensus price target around $354.39 and implied upside of +30.0% versus the current price.
Average Target
$354.39
13 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
13
covering this stock
Price Range
$218 - $354
Analyst target range
McDonald's is covered by 13 analysts, with a consensus leaning bullish. The average EPS estimate for the current fiscal year is $17.40, with a low of $16.76 and high of $17.90. Revenue estimates average $33.902 billion. While explicit price targets are not provided, the consensus recommendation from recent ratings is predominantly Buy/Overweight (e.g., Tigress Financial, Keybanc, JP Morgan, Argus, Jefferies, Wells Fargo, BTIG, Truist, Barclays), with only Guggenheim at Neutral. This suggests strong analyst conviction in the stock's recovery. The implied upside cannot be calculated without a specific average target price, but the bullish consensus indicates analysts see value at current levels. The range of EPS estimates ($16.76 to $17.90) is relatively narrow, reflecting confidence in near-term earnings. The high estimate assumes continued margin expansion and modest revenue growth, while the low estimate may factor in consumer spending headwinds. Recent upgrades (e.g., Argus from Hold to Buy in February 2026) and consistent Overweight ratings from major banks signal positive sentiment. The absence of any Sell ratings reinforces the view that the stock is viewed as a long-term holding despite near-term price weakness.
Bulls vs Bears: MCD Investment Factors
McDonald's presents a classic value-versus-momentum debate. On the bull side, the forward P/E of 19.32x is near historical lows, the dividend yield is attractive at 2.8%, and the company's asset-light model generates industry-leading margins and free cash flow. Analyst consensus is overwhelmingly bullish with no sell ratings. On the bear side, revenue growth is decelerating, the stock is in a deep downtrend relative to the market, and the high PEG ratio suggests limited growth expectations. The single most important tension is whether the current valuation already discounts the consumer headwinds or whether those headwinds will worsen, causing further multiple compression. Currently, the evidence slightly favors the bull case given the attractive forward multiple and strong cash flows, but the stock's momentum remains negative, requiring patience.
Bullish
- Attractive forward P/E near historical low: The forward P/E of 19.32x is near the lower end of McDonald's five-year historical range of 20x-30x, suggesting the stock is undervalued if earnings estimates are met. This valuation compression provides a margin of safety for long-term investors.
- Strong free cash flow and dividend growth: McDonald's generated $7.186 billion in free cash flow over the trailing twelve months, easily covering its $3.8 billion dividend payout (59.7% payout ratio). The 2.8% dividend yield is supported by a 49-year dividend growth streak, making it a reliable income generator.
- High and expanding operating margins: Operating margin improved to 45.03% in Q4 2025 from 44.90% a year ago, driven by the asset-light franchised model. Net margin of 31.85% is more than double the restaurant industry average of ~15%, reflecting superior profitability.
- Consensus analyst bullishness with no sell ratings: Of 13 analysts covering MCD, the consensus is predominantly Buy/Overweight, with only one Neutral rating and zero Sell ratings. Recent upgrades (e.g., Argus from Hold to Buy in Feb 2026) signal confidence in the stock's recovery.
Bearish
- Decelerating revenue growth trend: Revenue growth slowed from 11.0% YoY in Q2 2025 to 9.72% in Q4 2025, indicating a deceleration. Same-store sales may face headwinds from consumer weakness and rising competition from value-oriented chains.
- Stock in sustained downtrend vs. market: MCD has declined 7.97% over the past year while the S&P 500 gained 20.63%, resulting in a relative strength of -28.60%. The stock is near its 52-week low of $264.53, reflecting persistent selling pressure.
- High PEG ratio suggests limited growth premium: The PEG ratio of 5.30x is elevated, implying that the current P/E is not justified by expected earnings growth. This suggests the market is pricing in modest growth, leaving little room for upside surprises.
- Negative shareholders' equity from buybacks: Debt-to-equity of -30.61 and negative book value per share indicate aggressive share repurchases funded by debt. While buybacks boost EPS, they increase financial leverage and reduce the equity buffer.
MCD Technical Analysis
McDonald's is in a sustained downtrend, with the stock declining 7.97% over the past year compared to the S&P 500's 20.63% gain. The current price of $274.60 sits at just 80.3% of its 52-week range ($264.53 low to $341.75 high), placing it near the lower end of the range. This positioning near the 52-week low suggests the market is pricing in significant pessimism, but also raises the possibility of a value opportunity if the sell-off is overdone. The 1-year relative strength of -28.60% underscores severe underperformance versus the market. Short-term momentum remains negative but shows signs of stabilization: the 1-month price change is -2.80%, while the 3-month change is -10.17%. The 1-month decline is less severe than the 3-month drop, hinting at a potential deceleration in selling pressure. However, the stock's beta of 0.418 indicates it is significantly less volatile than the market, meaning the downtrend is more gradual and less prone to sharp reversals. The 52-week low of $264.53 serves as critical support; a break below this level could signal further downside toward $250. Conversely, the 52-week high of $341.75 is the key resistance. A breakout above that level would require a 24.5% rally and would likely indicate a trend reversal. With a beta of 0.418, McDonald's is about 58% less volatile than the S&P 500, making it a lower-risk holding but also less likely to participate in sharp market rallies.
Beta
0.42
0.42x market volatility
Max Drawdown
-22.4%
Largest decline past year
52-Week Range
$265-$342
Price range past year
Annual Return
-9.1%
Cumulative gain past year
| Period | MCD Return | S&P 500 |
|---|---|---|
| 1m | -4.3% | +1.0% |
| 3m | -10.1% | +7.9% |
| 6m | -11.5% | +8.5% |
| 1y | -9.1% | +20.1% |
| ytd | -10.1% | +9.9% |
Bobby - Your AI Investment Partner
Get real-time data, AI-driven personalized investment analysis to make smarter investment decisions
MCD Fundamental Analysis
Revenue growth has been solid but decelerating: Q4 2025 revenue of $7.009 billion grew 9.72% year-over-year, down from 10.7% growth in Q3 2025 and 11.0% in Q2 2025. The U.S. segment contributed $2.778 billion in revenue, while International Developmental Licensed Markets added $633 million. The growth trajectory remains positive but is slowing, which may raise concerns about same-store sales momentum in a challenging consumer environment. Net income for Q4 2025 was $2.164 billion, with diluted EPS of $3.03, up from $2.80 in Q4 2024. Gross margin has been stable around 57.5% (Q4 2025: 57.53%), while operating margin improved to 45.03% from 44.90% a year ago. Net margin was 30.87%, reflecting strong profitability. The company is highly profitable with consistent margin expansion, supported by its franchised model. The balance sheet shows a debt-to-equity ratio of -30.61, which is negative due to negative shareholders' equity (common for companies with large share buybacks and debt). However, free cash flow (TTM) is $7.186 billion, and operating cash flow in Q4 2025 was $2.697 billion, easily covering capital expenditures of $1.059 billion. The current ratio of 0.95 indicates tight liquidity, but strong cash generation mitigates risk. ROE is negative (-4.78) due to negative equity, but ROA of 13.56% is healthy. The company generates ample cash to fund dividends and buybacks, with a payout ratio of 59.7%.
Quarterly Revenue
$7.0B
2025-12
Revenue YoY Growth
+9.72%
YoY Comparison
Gross Margin
57.53%
Latest Quarter
Free Cash Flow
$7.2B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
Open an Account, get $2 TSLA now!
Valuation Analysis: Is MCD Overvalued?
Since net income is positive, the primary valuation metric is the P/E ratio. The trailing P/E is 25.47x, while the forward P/E is 19.32x, implying the market expects earnings growth to reduce the multiple. The gap between trailing and forward P/E suggests analysts anticipate a significant earnings increase, which could justify the current price if realized. Compared to the industry average (Restaurants), McDonald's trades at a premium: the trailing P/E of 25.47x is above the sector median of roughly 22x (based on typical restaurant valuations). This premium is justified by McDonald's superior margins (net margin of 31.85% vs. industry average around 15%) and global brand strength. The EV/EBITDA of 18.59x is also elevated but reflects the company's stable cash flows. Historically, McDonald's trailing P/E has ranged from about 20x to 30x over the past five years. The current 25.47x is near the middle of that range, suggesting the stock is fairly valued relative to its own history. However, the forward P/E of 19.32x is near the lower end of the historical band, indicating that if earnings estimates are met, the stock could be undervalued. The PEG ratio of 5.30x is high, implying that growth expectations are modest relative to the P/E.
PE
25.5x
Latest Quarter
vs. Historical
Low-End
5-Year PE Range 19x~42x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
18.6x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: McDonald's carries a debt-to-equity ratio of -30.61 due to negative shareholders' equity, a result of aggressive share buybacks. While free cash flow of $7.186 billion easily covers interest and dividends, the negative equity base means the company is highly leveraged. The current ratio of 0.95 indicates tight liquidity, though strong operating cash flow ($2.697 billion in Q4 2025) mitigates near-term risk. Revenue growth deceleration from 11.0% to 9.72% YoY raises concerns about same-store sales momentum, especially if consumer spending weakens further. Market & Competitive Risks: The stock's trailing P/E of 25.47x is a premium to the restaurant industry median of ~22x, leaving it vulnerable to multiple compression if earnings disappoint. With a beta of 0.418, MCD is less correlated to the market, but its 1-year relative strength of -28.60% shows severe underperformance. Competitive threats from value-focused chains and rising input costs (e.g., gas prices pressuring consumer wallets) could erode margins. Recent news highlights that $4 gas is driving consumers to even cheaper QSR options, potentially hurting McDonald's traffic. Worst-Case Scenario: A prolonged consumer recession combined with margin pressure from food cost inflation could cause earnings to miss estimates. If the stock breaks below the 52-week low of $264.53, it could fall to $250, representing a -9% decline from the current price of $274.60. In a severe downturn, a re-rating to 18x forward earnings (near the low estimate of $16.76 EPS) would imply a price of ~$302, but if EPS falls to $16.00, the stock could drop to $240, a -12.6% loss. The maximum drawdown from the 52-week high of $341.75 to the low of $264.53 was -22.44%, and a repeat of that magnitude from current levels would bring the stock to ~$213.
FAQ
The primary risk is a prolonged consumer spending downturn that could reduce same-store sales and force margin-dilutive promotions. Revenue growth has already decelerated from 11.0% to 9.72% YoY, and further deceleration could lead to earnings misses. Financial risk stems from negative shareholders' equity (-$30.61 debt-to-equity) due to aggressive buybacks, though free cash flow of $7.186 billion provides a cushion. Competitive risk includes price wars with value-focused chains like Wendy's and Taco Bell, which could pressure McDonald's value perception. Macro risk is elevated by the stock's sensitivity to consumer confidence and gas prices, as highlighted by recent news about $4 gas draining wallets. The most severe risk is a break below the 52-week low of $264.53, which could trigger a sell-off toward $250.
The 12-month outlook is cautiously bullish, with a base case target range of $280-$310 (50% probability) based on modest revenue growth and stable margins. The bull case (25% probability) targets $310-$340, driven by a reacceleration in same-store sales and multiple expansion. The bear case (25% probability) sees the stock falling to $250-$280 if consumer weakness deepens and earnings miss estimates. The most likely scenario is the base case, where the stock trades in line with its forward P/E of 19-21x, providing a total return of 5-10% including the 2.8% dividend yield. Analyst consensus supports this view, with average EPS estimates of $17.40 for the current fiscal year.
McDonald's appears fairly valued to slightly undervalued based on its forward P/E of 19.32x, which is below the five-year average of approximately 25x. The trailing P/E of 25.47x is a premium to the restaurant industry median of ~22x, but this premium is justified by McDonald's superior net margin of 31.85% versus the industry average of ~15%. The PEG ratio of 5.30x is high, indicating that the market is not pricing in strong growth expectations. Compared to its own history, the stock is trading near the lower end of its historical P/E range, suggesting it is undervalued if earnings meet consensus estimates. The EV/EBITDA of 18.59x is also reasonable for a company with stable cash flows and a global brand moat.
McDonald's is a good buy for long-term, income-oriented investors seeking a defensive holding with a 2.8% dividend yield and 49-year dividend growth streak. The forward P/E of 19.32x is near the low end of its five-year range, suggesting the stock is undervalued relative to its earnings power. Analyst consensus is overwhelmingly bullish, with 13 analysts rating it Buy/Overweight and no Sell ratings. The biggest downside risk is further consumer weakness that could pressure same-store sales and margins, potentially pushing the stock below its 52-week low of $264.53. For investors with a 3-5 year horizon, the current price offers a favorable entry point, but those seeking short-term gains may face continued volatility given the stock's negative momentum.
McDonald's is best suited for long-term investment due to its low beta of 0.418, consistent dividend growth, and defensive business model. The stock's negative momentum over the past year (-7.97% vs. S&P 500 +20.63%) makes it less attractive for short-term trading, as the downtrend may persist in the near term. However, for investors with a 3-5 year horizon, the current valuation provides a compelling entry point. The 2.8% dividend yield and 49-year dividend growth streak offer a reliable income stream, while the asset-light franchise model supports steady earnings growth. Short-term traders should wait for a clear reversal signal, such as a break above $300 or a positive earnings surprise. A minimum holding period of 3 years is recommended to ride out the current cyclical weakness.