Optional product analytics
With your permission, we use privacy-limited analytics to understand which research journeys work. We do not run advertising trackers or session replay. You can change this choice in Preferences. Read the Privacy Policy.
Bull: Digital investments and automation yield outsized margin expansion.
Severe Franchisee Rebellion: Persistent inflation squeezes franchisee unit economics, halting global unit expansion and forcing parent rent and royalty concessions.
McDonald's operates a highly resilient, asset-heavy, heavily franchised model. It functions largely as a real estate and royalty collection business, resulting in industry-leading operating margins (45%+) and massive, consistent free cash flow generation. We initiate at Strong Buy based on a 49.37% discount to our $423.76 fair value midpoint.
McDonald's operates a highly resilient, asset-heavy, heavily franchised model. It functions largely as a real estate and royalty collection business, resulting in industry-leading operating margins (45%+) and massive, consistent free cash flow generation. We initiate at Strong Buy based on a 49.37% discount to our $423.76 fair value midpoint.
Intangible Assets (Global Brand Recognition)
Cost Advantage (Unmatched Supply Chain Scale)
Consumers prioritize convenience and value, accelerating digital and delivery adoption. Commodity deflation boosts franchisee profitability, spurring rapid global unit expansion.
The market underprices the extreme durability of MCD's franchise royalty stream. A structural premium to internal valuation cross-checks is justified by massive, predictable cash flows.
A severe macro shock hitting lower-income consumers drops comparable sales by 3-5%, forcing deep promotional discounting. Franchisee margins contract, stalling unit growth. However, core FCF remains positive due to the asset-light royalty structure, averting a liquidity cliff but capping near-term equity upside.
Intangible Assets (Global Brand Recognition)
Cost Advantage (Unmatched Supply Chain Scale)
Efficient Scale (Prime Real Estate Portfolio)
Economic profit is supported when reported returns exceed the company cost-of-capital hurdle.
Unavailable
FCFF DCF remains positive at the base case: base FCFF $8.8B after capex $3.2B, with terminal value at 77.3% of enterprise value. No FCF cliff is projected unless capex/ or materially resets.
If global comp sales exceed internal valuation cross-checks, expect a relief rally as pricing power is validated.
If global comp sales exceed internal valuation cross-checks, expect a relief rally as pricing power is validated.
If global comp sales exceed internal valuation cross-checks, expect a relief rally as pricing power is validated.
If global comp sales exceed internal valuation cross-checks, expect a relief rally as is validated.
Mature phase. Heavy historical reinvestment in store modernization is complete. The cycle has shifted to pure cash harvesting and digital infrastructure scaling.
Consumers prioritize convenience and value, accelerating digital and delivery adoption. Commodity deflation boosts franchisee profitability, spurring rapid global unit expansion.
Stagflation squeezes lower-income wallets. Menu prices hit elasticity limits, compressing traffic while input costs remain elevated, forcing margin compression.
Mature phase. Heavy historical reinvestment in store modernization is complete. The cycle has shifted to pure cash harvesting and digital infrastructure scaling.
Core holding. Warrants an overweight allocation within a consumer-discretionary or dividend-growth sleeve due to its highly defensive, low-beta characteristics.
Trim exposure if valuation multiples decouple entirely from bond yields (e.g., P/E > 30x) or if structural franchisee financial health deteriorates over consecutive quarters.
Strong Buy. We are aggressive buyers of McDonald's highly resilient, real estate and royalty collection business. Current levels deeply discount the inherent stability of its 45%+ operating margins and $7B+ free cash flow generation.
Strong internal valuation cross-checks ($344.55) structurally undervalues the duration of MCD's competitive advantage, penalizing near-term macro noise. Our Moat Fade and DCF models correctly capture the massive terminal value of the franchise royalty stream.
Strong Buy. We are aggressive buyers of McDonald's highly resilient, real estate and royalty collection business. Current levels deeply discount the inherent stability of its 45%+ operating margins and $7B+ free cash flow generation.
Reassess the thesis against the named valuation, risk, and quarterly checkpoint evidence in this report.
Capture your own thesis, position size, and follow-up questions. Stays on this device, only you can see it.
Consumer fatigue sets in definitively. Fast-casual competitors steal share. Franchisee profitability pressure requires corporate royalty concessions, fundamentally breaking the historical margin algorithm.
Persistent inflation squeezes franchisee unit economics, halting global unit expansion and forcing parent rent and royalty concessions.
Aggressive pricing overshoots core low-income demographic tolerance, leading to structural, unrecoverable share loss to grocery or at-home eating.
Higher-for-longer interest rates significantly increase servicing costs on MCD's massive $54B debt load, threatening dividend growth and buyback capacity.
The five developments that would weaken our investment case.
Persistent traffic losses indicate that cumulative menu price increases have alienated core lower-income diners, driving permanent customer substitution toward grocery alternatives and eroding market share.
Current:3.7% revenue growth for the period ended 2025-12-31
Alert ifGlobal comparable guest counts contract by more than 3.0% across two consecutive fiscal quarters
Severe margin compression at franchised restaurants threatens system reinvestment, forces corporate rent concessions, and halts restaurant modernization programs essential for long-term brand equity.
Current:57.4% gross margin for the period ended 2025-12-31
Alert ifFranchisee cash flows decline by more than 15.0% year-over-year over a trailing twelve-month period prompting formal royalty concessions
A slowdown in restaurant footprint expansion caps compound revenue growth, undermining the capital-efficient expansion model that underpins long-term compounding and royalty revenue growth.
Current:$26.89B annual revenue for the period ended 2025-12-31
Alert ifGlobal net new restaurant openings decelerate by more than 20.0% year-over-year over a twelve-month measurement period
Inability to offset commodity and labor inflation with price realization squeezes operating profits, signaling reached consumer price resistance limits and reducing corporate cash returns.
Current:46.1% for the period ended 2025-12-31
Alert ifConsolidated operating margin falls below 45.0% over a trailing twelve-month period
Elevated interest expense reduces discretionary cash flow, forcing management to curtail share buybacks or constrain dividend growth to preserve investment-grade credit ratings.
Current:1.232 operating cash flow to net income ratio as of 2026-05-08
Alert ifAnnual debt servicing costs increase by more than $500M reducing annual share repurchases below $2.0B over a four-quarter period
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
Project SBC-adjusted EPS, discount each year's earnings at cost of equity, then add a Gordon-growth terminal value.
This edition does not contain enough finite inputs to reproduce the lens calculation.
Project EPS through the explicit advantage period, fade growth as competition catches up, and discount the full stream at cost of equity.
This edition does not contain enough finite inputs to reproduce the lens calculation.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
This edition does not contain enough finite inputs to reproduce the lens calculation.
Convert the revenue and margin path into after-tax free cash flow, discount the annual per-share amounts and terminal value at , then adjust for signed per current share.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Multiply the peer median PEG by this stock's forecast growth to derive an implied forward P/E, then apply it to forward EPS.
Digital investments and automation yield outsized margin expansion. The consumer absorbs price increases without traffic degradation, allowing aggressive global unit expansion and massive capital returns.
Consistent execution of the franchise model. Pricing successfully offsets localized traffic softness. Reliable FCF generation funds steady dividend growth and share repurchases, driving compounding returns.
Warning level: Global comparable guest counts contract by more than 3.0% across two consecutive fiscal quarters. Persistent traffic losses indicate that cumulative menu price increases have alienated core lower-income diners, driving permanent customer substitution toward grocery alternatives and eroding market share.
Warning level: Franchisee cash flows decline by more than 15.0% year-over-year over a trailing twelve-month period prompting formal royalty concessions. Severe margin compression at franchised restaurants threatens system reinvestment, forces corporate rent concessions, and halts restaurant modernization programs essential for long-term brand equity.
Warning level: Global net new restaurant openings decelerate by more than 20.0% year-over-year over a twelve-month measurement period. A slowdown in restaurant footprint expansion caps compound revenue growth, undermining the capital-efficient expansion model that underpins long-term compounding and royalty revenue growth.
Warning level: Consolidated operating margin falls below 45.0% over a trailing twelve-month period. Inability to offset commodity and labor inflation with price realization squeezes operating profits, signaling reached consumer price resistance limits and reducing corporate cash returns.
Warning level: Annual debt servicing costs increase by more than $500M reducing annual share repurchases below $2.0B over a four-quarter period. Elevated interest expense reduces discretionary cash flow, forcing management to curtail share buybacks or constrain dividend growth to preserve investment-grade credit ratings.
| $25.50B |
| $25.92B |
| $26.89B |
| +5.1% |
| Gross profit | $13.21B | $14.56B | $14.71B | $15.43B | +5.3% |
| Operating income | $9.03B | $11.88B | $11.85B | $12.48B | +11.4% |
| Net income | $6.18B | $8.47B | $8.22B | $8.56B | +11.5% |
| EPS (diluted) | $8.33 | $11.56 | $11.39 | $11.95 | +12.8% |
| EBITDA | $10.90B | $13.86B | $13.95B | $14.68B | +10.4% |
| R&D | — | — | — | — | — |
| SG&A | $2.49B | $2.44B | $2.41B | $2.58B | +1.2% |
Capital allocation should be evaluated against reinvestment needs, balance-sheet strength, and shareholder returns.
| Revenue | 26,885,000,000 |
|---|---|
| Cost of revenue | 11,451,000,000 |
| Gross profit | 15,434,000,000 |
| Operating expenses | 3,040,000,000 |
| Operating income | 12,394,000,000 |
| Non-operating items and tax | -3,831,000,000 |
| Net income | 8,563,000,000 |
| Total assets | 59,515,000,000 |
|---|---|
| Cash | 774,000,000 |
| Current assets | 4,163,000,000 |
| Total liabilities | 61,306,000,000 |
| Current liabilities | 4,361,000,000 |
| Shareholder deficit | 1,790,000,000 |
Point-in-time financial data used in the 2026-05-08 analysis.
| Period | Revenue | EBITDA | Net income | Operating cash flow | Free cash flow | Capex | Depreciation and amortization | Stock-based compensation | Share repurchases | Dividends paid | Net debt issuance | Investing cash flow | Financing cash flow | Beginning cash | Ending cash | Cash and investments | Total debt | Operating margin | ROIC | WACC | ROIC − WACC spread |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021-12-31 | — | — | — | 9.1B | 7.1B | 2B | 1.9B | 139.2M | 845.5M | 3.9B | -1.1B | — | — | — | — | — | — | — | — | — | — |
| 2022-12-31 | 23.2B | 10.9B | 6.2B | 7.4B | 5.5B | 1.9B | 1.9B | 167M | 3.9B | 4.2B | 1.2B | — | — | — | — | 2.6B | 48.7B | 44.6% | — | 3.5% | — |
| 2023-12-31 | 25.5B | 13.9B | 8.5B | 9.6B | 7.3B | 2.4B | 2B | 175M | 3.1B | 4.5B | 3B | — | — | — | — | 4.6B | 53.1B | 46.1% | — | 3.6% | — |
| 2024-12-31 | 25.9B | 13.9B | 8.2B | 9.4B | 6.7B | 2.8B | 2.1B | 172M | 2.8B | 4.9B | -71M | — | — | — | — | 1.1B | 51.9B | 45.7% | — | 4.2% | — |
| 2025-12-31 | 26.9B | 14.7B | 8.6B | 10.6B | 7.2B | 3.4B | 2.2B | 165M | 2.1B | 5.1B | -72M | — | — | — | — | 774M | 54.8B | 46.1% | — | 3.8% | — |
MCD trades at 19.9x forward earnings against a peer median of 21.0x; EV/EBITDA of 17.5x against a peer median of 18.3x; 6 peers.
| Current / pullbacks | Initiate full positions immediately. Accumulate further on any macro-driven dips below $270. | Initiate full positions immediately. Accumulate further on any macro-driven dips below $270. |
This edition does not contain enough finite inputs to reproduce the lens calculation.
This edition does not contain enough finite inputs to reproduce the lens calculation.
This edition does not contain enough finite inputs to reproduce the lens calculation.
| Yum! Brands Inc. |
| 21.0x |
| 5.1x |
| 18.3x |
| — |
| 31.0% |
| CMG | Chipotle Mexican Grill Inc. | 24.5x | 3.5x | 20.1x | 49.2% | 13.3% |
| DRI | Darden Restaurants Inc. | 17.2x | 1.8x | 15.1x | 51.5% | 13.2% |
| DPZ | Domino's Pizza Inc. | 15.8x | 2.2x | 15.6x | — | 19.3% |
