June 20, 2024
Top 10 Stock McDonald's Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: McDonald's – Top 10 Stock in S&P 500 Consumer Discretionary Index
McDonald's is listed as a top 10 stock on June 20, 2024 in the market index S&P US Luxury because of its high performance in at least one of the Obermatt investment strategies. As all consolidated Obermatt Ranks exhibit excellent performance, including positive market sentiment in the professional investor community, it is a solid stock investment where the risk of paying too much for the shares is limited. Based on the Obermatt 360° View of 100 (top 100% performer), Obermatt assesses an overall strong buy recommendation for McDonald's on June 20, 2024.
Snapshot: Obermatt Ranks
| Country | USA |
| Industry | Restaurants |
| Index | Dow Jones, Dividends USA, Diversity USA, S&P US Luxury, S&P 500 |
| Size class | XX-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View McDonald's Strong Buy
| 360 METRICS | June 20, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 71 |
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| GROWTH | ||||||||
| GROWTH | 69 |
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| SAFETY | ||||||||
| SAFETY | 81 |
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| SENTIMENT | ||||||||
| SENTIMENT | 88 |
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| 360° VIEW | ||||||||
| 360° VIEW | 100 |
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ANALYSIS: With an Obermatt 360° View of 100 (better than 100% compared with alternatives) for 2024, overall professional sentiment and financial characteristics for the stock McDonald's are very positive. The 360° View is based on consolidating four consolidated indicators, with all four indicators above average for McDonald's. The consolidated Value Rank has an attractive rank of 71, which means that the share price of McDonald's is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means the stock price is lower than for 71% of alternative stocks in the same industry. The consolidated Growth Rank has a good rank of 69, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. The company is also safely financed with a Safety rank of 81. Finally, professional market sentiment is above average compared with other stock investment alternatives with a Sentiment Rank of 88. ...read more
RECOMMENDATION: With a consolidated 360° View of 100, McDonald's is better positioned than 100% of all alternative stock investment opportunities based on the Obermatt Method. As all consolidated Obermatt Ranks exhibit excellent performance, such as good value (Value Rank of 71), above-average growth (Growth Rank of 69), safe financing practices (Safety Rank of 81), and a positive market sentiment in the professional investor community (Sentiment Rank of 88), it is a solid stock investment where the risk of paying too much for the shares is limited and disappointments are less likely to occur, unless information not publicly available. High-Value Ranks sometimes indicate that the company's future is challenging. If they are safely financed and have above average growth, and are still a good value, it may indicate that this will not continue. We recommend evaluating whether the future of McDonald's is as difficult as the stock’s low price, despite what good growth and safe financing practice suggest. Since the professional community is optimistic, you might have less to worry about, and the stock is just not sufficiently visible, which may indicate good timing right now. ...read more
Sentiment Strategy: Professional Market Sentiment for McDonald's very positive
ANALYSIS: With an Obermatt Sentiment Rank of 88 (better than 88% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock McDonald's is very positive. The Sentiment Rank is based on consolidating four sentiment indicators where all but one are above average for McDonald's. Analyst Opinions are at a rank of 66 (better than 66% of alternative investments), which means that currently, stock research analysts tend to recommend a stock investment in the company. The Professional Investors rank is also good at 79, which means that currently, professional investors hold more stock in this company than in 79% of alternative investment opportunities. Pros tend to favor investing in this company. In addition, Market Pulse has a rank of 93 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 93% of competitors). But Analyst Opinions Change has a below-average rank of 34, which means that stock research experts are currently changing their opinions for the worse when it comes to recommending this stock. In other words, they are getting more critical of investments in McDonald's. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 88 (more positive than 88% compared with investment alternatives), McDonald's has a reputation among professional investors that is significantly higher than that of its competitors. This is an early sign of caution, even if the stock has significantly appreciated. If analysts change their opinions, the stock may become too expensive. If the price is on the way down, the trend may continue. This may be a stock with a good reputation and history, but it may have reached its breaking point by now. Investors should look at the Value Ranks as well. If they indicate trouble, it might just materialize in the future. ...read more
Value Strategy: McDonald's Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 71 (better than 71% compared with alternatives), McDonald's shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for McDonald's. Expected dividend yields are higher than for 79% of comparable companies (a Dividend Yield rank of 79), making the stock attractive. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 100, which means that the stock price is lower compared with invested capital than for 100% of comparable investments. But in respect to sales and profits, the picture is reversed. Price-to-Sales is 5 which means that the stock price compared with what market professionals expect for future profits is higher than for 95% of comparable companies, indicating a low value concerning McDonald's's sales levels. The Price-to-Profit ratio (also referred to as price-earnings (P/E) ratio) is also unfavorable for McDonald's with a rank of 32. This means that the stock price, compared with what market professionals expect for future profits, is higher than for 68% of comparable companies, indicating a low value concerning McDonald's's profit levels. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 71, is a buy recommendation based on McDonald's's stock price compared with the company's operational size and dividend yields. The company seems confident that it can generate a reasonable return on invested capital, because it pays an above-average dividend while profits are below what you would expect for a company with this stock price. If you agree with this practice and believe that profits will return to higher levels, as the current dividend policy suggests, McDonald's may be an attractive investment. If this is not the case, you may want to be careful with this stock as it is also expensive compared with its expected revenue levels. ...read more
Growth Strategy: McDonald's Growth Momentum good
ANALYSIS: With an Obermatt Growth Rank of 69 (better than 69% compared with alternatives), McDonald's shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. The Growth Rank is based on consolidating four value indicators, with all but one indicator above average for McDonald's. Sales Growth has a rank of 60 which means that currently, professionals expect the company to grow more than 60% of its competitors. Capital Growth is also above 47% of competitors with a rank of 86, and Stock Returns with the rank of 50 is also an outperformance. Only Profit Growth is low with a rank of 47 which means that currently, professionals expect the company to grow its profits less than 53% of its competitors. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 69, is a buy recommendation for growth and momentum investors. All three operating growth indicators, namely revenue, profit, and capital growth, are showing improvements. This is a good indication of a company with a positive future. That might, at the same time, be the simple reason why profit growth is low. A growing company needs money and thus can't yet show high profit growth. Look out for signs in corporate communication about extra growth efforts costing time and money. If that is the case, McDonald's is a good growth stock. ...read more
Safety Strategy: McDonald's Debt Financing Safety very solid
| SAFETY METRICS | June 20, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 26 |
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| REFINANCING | ||||||||
| REFINANCING | 70 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 90 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 81 |
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ANALYSIS: With an Obermatt Safety Rank of 81 (better than 81% compared with alternatives) for 2024, the company McDonald's has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of McDonald's is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with two out of three indicators above-average for McDonald's. Refinancing is at 70, meaning the portion of the debt that is about to be refinanced is below average. It has less debt in the refinancing stage than 70% of its competitors. Liquidity is also good at 90, meaning the company generates more profit to service its debt than 90% of its competitors. This indicates that the company is safer when it comes to debt service. However, Leverage is rather large at 26, which means the company has an above-average debt-to-equity ratio. It has more debt than 74% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 81 (better than 81% compared with alternatives), McDonald's has a financing structure that is significantly safer than that of its competitors. This is not bad if things go well. The higher debt level means better returns to shareholders if things go well. Many top-performing companies operate with higher debt levels, and McDonald's could be in that group. But if you expect the environment to turn rougher, the higher leverage could become a problem. The same is valid if you expect interest rates to rise. That could squeeze shareholder returns, which so far have benefitted from better conditions. ...read more
Combined financial peformance: McDonald's Top Financial Performance
| COMBINED PERFORMANCE | June 20, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 71 |
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| GROWTH | ||||||||
| GROWTH | 69 |
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| SAFETY | ||||||||
| SAFETY | 90 |
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| COMBINED | ||||||||
| COMBINED | 98 |
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ANALYSIS: With an Obermatt Combined Rank of 98 (better than 98% compared with investment alternatives), McDonald's (Restaurants, USA) shares have much better financial characteristics than comparable stocks. Shares of McDonald's are a good value (attractively priced) with a consolidated Value Rank of 71 (better than 71% of alternatives), show above-average growth (Growth Rank of 69), and are safely financed (Safety Rank of 81), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 98, is a strong buy recommendation based on McDonald's's financial characteristics. As the company McDonald's's key financial metrics all exhibit excellent performance, such as good value (Obermatt Value Rank of 71), above-average growth (Obermatt Growth Rank of 69), and indicate that the company is safely financed (Obermatt Safety Rank of 81), it is a solid stock investment where the risk of paying too much for the share is limited, unless the company has a bleak future. Such good financial performance can indicate that the company's future might actually be challenging, as it may be difficult to maintain the good performance. If they are safely financed and have been growing above average, and are still a good value, it means that the market is keeping prices low, for a reason which may become clearer over time. We recommend evaluating the future of McDonald's. If you believe the company's future is market-typical or even better, this could be an argument for a share purchase. ...read more
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