McDonalds Corp (MCD) – free report for Ask Matt, Very Attractive Rating

McDonalds Corp (MCD) is one of the few stocks in our 3000+ universe to get our Very Attractive Rating. To get this rating, MCD achieved (1) high and ris­ing eco­nomic prof­its (as dis­tinct from account­ing prof­its**) and (2) a cheap val­u­a­tion. As shown in our free report on MCD, the company’s ROIC is in the 2nd Quin­tile of all the com­pa­nies we cover. At the same time, the stock boasts a 3.5% FCF Yield and our dynamic dis­counted cash flow analy­sis shows the cur­rent stock val­u­a­tion implies that the mar­ket believes MCD’s prof­its will grow by just 10% over the entire remaining life of the company. In other words, the stock is priced for very little growth.

HIDDEN GEM: Our detailed val­u­a­tion model shows that MCD grew its “eco­nomic” prof­its more than it account­ing prof­its dur­ing its last fis­cal year. Eco­nomic prof­its rose by $272mm while account­ing prof­its rose by $238mm. For details on what causes the dif­fer­ence between Eco­nomic Ver­sus Account­ing Prof­its, see Appen­dix 3 on page 10 of our free report on MCD.

See Appen­dix 4 to learn how MCD increased NOPAT by cut­ting costs and increased its NOPAT Mar­gin. See Appen­dix 5 for details on how MCD expanded its Invested Cap­i­tal. Appen­dix 7 (in the Return on Invested Cap­i­tal sec­tion) shows how the improved NOPAT Mar­gin and steady Invested Cap­i­tal Turns result in an increase in ROIC (to 13.6% from 13.4%) and Eco­nomic Profit, which rose by $272mm while Net Income rose by only $238mm.

As per and , MCD fits the pro­file of a great stock to buy.

**See and Eco­nomic Ver­sus Account­ing Prof­its for more detail on why account­ing prof­its are not reli­able indi­ca­tors of cor­po­rate prof­itabil­ity or value creation.

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