McDonald's Corporation

Comprehensive Analysis of McDonald's (MCD)

Technical Analysis MCD has shown steady outperformance with solid short-term gains and low volatility, indicating strong momentum with below-market risk. However, trading near its 52-week high suggests limited immediate upside without new positive catalysts, warranting caution from a technical perspective.

Fundamentals Revenue dipped slightly in recent quarters, but MCD maintains robust profitability, with operating margins above 45% and healthy interest coverage demonstrating strong financial health. The company’s pricing power and efficient cost management underscore its resilient business model.

Valuation MCD trades at a premium, with a trailing P/E of nearly 28, reflecting investor confidence in its stability and earnings capacity. However, the negative PEG ratio highlights concerns about future earnings growth relative to its valuation, indicating potential overvaluation without clear growth justification.

Risk Assessment MCD presents low volatility risk due to its low beta and modest drawdowns, making it a relatively stable holding. Key risks stem from inflationary cost pressures, shifting consumer preferences, and complexities in managing its global franchise system rather than market-driven volatility.

Investment Recommendation Based on the analysis, MCD represents a high-quality defensive stock with strong profitability and low volatility, suitable for risk-averse investors seeking stability. However, its premium valuation and limited near-term upside suggest it may be fairly priced at current levels. Investors might consider buying on any meaningful pullback to maximize long-term value, while acknowledging that growth expectations appear modest. This is not investment advice, for reference only.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the analysis provided, the 12-month outlook for McDonald's (MCD) is one of stability with modest growth potential, tempered by its premium valuation.

Key catalysts will likely be the continued execution of its "Accelerating the Arches" strategy, focusing on digital sales, delivery, and menu innovation to drive comparable sales growth and leverage its strong franchise model. The primary risk remains persistent inflationary pressures on food and labor costs, which could compress its industry-leading margins if not fully offset by strategic pricing. Given the stock is trading near all-time highs with a high P/E ratio, significant multiple expansion is unlikely; however, its defensive qualities could support a steady climb. A reasonable target price range for the next 12 months would be $340-$360, reflecting modest earnings growth and its status as a high-quality, lower-volatility holding.

Wall Street Consensus

Most Wall Street analysts are optimistic about McDonald's Corporation's 12-month outlook, with consensus target around $327.11, indicating expected upside potential.

Overall, MCD has investment potential but also faces challenges. Here are key factors to weigh before investing.

MCD has demonstrated strong relative outperformance with modest but consistent gains over recent periods.

The stock has posted solid short-term gains of 6.16% over one month and 6.78% over three months, significantly outperforming the broader market by 6.8% during the three-month period. This consistent upward momentum, combined with a low beta of 0.528, indicates MCD has delivered strong returns with below-market volatility.

Currently trading at $327.62, MCD sits near the upper end of its 52-week range, approximately 84% above its low and just 2.4% below its high. While not severely overbought, the proximity to the 52-week high suggests limited near-term upside potential barring new positive catalysts.

Revenue & Profitability MCD's Q4 2025 revenue dipped slightly to $7.01 billion from $7.08 billion in Q3, while maintaining strong profitability. The net profit margin remains healthy at 30.9%, though it moderated from 32.2% in the previous quarter. Operating margins above 45% demonstrate the company's consistent ability to convert revenue into profits.

Financial Health The interest coverage ratio of 7.7x indicates MCD comfortably services its debt obligations, though quarterly interest expense remains substantial at approximately $410 million. While specific debt ratios are unavailable in this data, the consistent profitability supports ongoing debt servicing capacity.

Operational Efficiency MCD demonstrates strong operational execution with an operating income ratio of 45.1%, reflecting efficient cost management. Asset turnover metrics are not available in this dataset, but the company's pricing power is evident in its price-to-sales ratio of 31.1, suggesting market confidence in its business model efficiency.

Valuation Level MCD's trailing PE of 27.73 and forward PE of 25.22 suggest a premium valuation relative to broader market averages, indicating the market prices MCD at a significant earnings multiple. The negative PEG ratio of -4.75, however, implies that earnings growth expectations are either negative or not aligned with the current multiple, raising caution about overvaluation based on growth-adjusted metrics.

Peer Comparison A peer comparison cannot be performed as industry average data is unavailable. To contextualize MCD’s valuation, future analysis should benchmark these multiples against the restaurant or fast-food industry medians for PE, PEG, and EV/EBITDA to determine relative attractiveness.

Volatility Risk: MCD exhibits low volatility risk, as evidenced by its beta of 0.528, indicating its price movements are less pronounced than the broader market. The modest maximum drawdown of -11.12% over the past year further underscores its relative stability and defensive characteristics, suggesting limited downside volatility compared to more cyclical equities.

Other Risks: The stock carries no discernible short interest, which mitigates the risk of a short squeeze but also signals broad market consensus on its valuation. Primary risks are therefore more fundamental, potentially including inflationary pressures on input costs, evolving consumer dietary preferences, and the operational complexities of its vast global franchise network.