June 8, 2023
Top 10 Stock McDonald's 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 Dow Jones Industrial Average
McDonald's is listed as a top 10 stock on June 08, 2023 in the market index Dow Jones because of its high performance in at least one of the Obermatt investment strategies. As three out of four consolidated Obermatt Ranks exhibit excellent performance, it is a solid investment where the risk of paying too much for the shares is low, despite a currently slow growth momentum. Based on the Obermatt 360° View of 62 (high 62% performer), Obermatt assesses an overall buy recommendation for McDonald's on June 08, 2023.
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° Assessment McDonald's Buy
| 360 METRICS | June 8, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 61 |
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| GROWTH | ||||||||
| GROWTH | 45 |
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| SAFETY | ||||||||
| SAFETY | 70 |
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| SENTIMENT | ||||||||
| SENTIMENT | 100 |
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| 360° VIEW | ||||||||
| 360° VIEW | 62 |
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ANALYSIS: With an Obermatt 360° View of 62 (better than 62% compared with alternatives), overall professional sentiment and engagement for the stock McDonald's are above average. The 360° View is based on consolidating four consolidated indicators, with half of the indicators below and half above average for McDonald's. The consolidated Value Rank has an attractive rank of 61, which means that the share price of McDonald's is on the lower side compared with typical size in indicators such as revenues, profits, and invested capital. This means the stock price is lower than for 61% of alternative stocks in the same industry. The company is also safely financed with a Safety rank of 70. In addition, professional market sentiment is above average compared with other stock investment alternatives with a Sentiment Rank of 100. But the consolidated Growth Rank has a low rank of 45, which means that the company is below average in terms of growth and momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. 55 of its competitors have better growth. ...read more
RECOMMENDATION: With a 360° View of 62, McDonald's is better positioned than 62% of all alternative stock investment opportunities based on the Obermatt Method. Three out of four consolidated Obermatt Ranks show above-average performance. The stock has as good value (Value Rank of 61), secure financing practices (Safety Rank of 70), and positive market sentiment in the professional investor community (Sentiment Rank of 100). 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. The company’s growth expectations are below the industry average (Growth Rank of 45), but that could also be temporary since professional investors remain optimistic despite the low growth numbers. The low price as reflected in the good Value Rank could indicate that the company's future is challenging. The below-par growth performance may be the reason for this. Companies that grow less are typically cheaper than fast-growing competitors. We recommend evaluating whether the future of McDonald's is as difficult as the stock’s low price suggests, despite the positive professional investor sentiment. Since the professional community is optimistic, you might have less to worry about, and the stock may just go through a more challenging phase now, indicating good timing. ...read more
Sentiment Strategy: Professional Market Sentiment for McDonald's very positive
ANALYSIS: With an Obermatt Sentiment Rank of 100 (better than 100% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock McDonald's is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for McDonald's. Analyst Opinions are at a rank of 72 (better than 72% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 95, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in McDonald's. The Professional Investors rank is 71, which means that currently, professional investors hold more stock in this company than in 71% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 98 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 98% of competitors). ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 100 (more positive than 100% compared with investment alternatives), McDonald's has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean McDonald's stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: McDonald's Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 61 (better than 61% 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 74% of comparable companies (a Dividend Yield rank of 74), 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 97, which means that the stock price is lower compared with invested capital than for 97% of comparable investments. But in respect to sales and profits, the picture is reversed. Price-to-Sales is 2 which means that the stock price compared with what market professionals expect for future profits is higher than for 98% 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 26. This means that the stock price, compared with what market professionals expect for future profits, is higher than for 74% 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 61, 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 low
ANALYSIS: With an Obermatt Growth Rank of 45 (better than 45% compared with alternatives), McDonald's shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for McDonald's. Sales Growth has a rank of 62 which means that currently professionals expect the company to grow more than 62% of its competitors. Stock Returns are also above average with a rank of 59. But Capital Growth has only a rank of 30, which means that currently professionals expect the company to grow its invested capital less than 70% of its competitors. Profit Growth is also low, with a rank of only 34, which means that, currently, professionals expect the company to grow its profits below average. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 45, is a HOLD recommendation for growth and momentum investors. This is a surprising picture, as the messages from the operating growth indicators of revenues, profits, and invested capital are mixed, while stock returns are above average. It may indicate new intellectual properties, such as brand improvement or a strong market position that shows in revenues but not in the capital. The low profit-growth rate may indicate an early phase where costs are still high, and revenues don't fully cover upfront investments or fixed costs. The positive investor outlook with a 59% peer outperformance is reaffirmed in this case which may be a good sign for an investment into a well-protected high-growth company. This fact needs to be confirmed by researching the company website and press. ...read more
Safety Strategy: McDonald's Debt Financing Safety above-average
| SAFETY METRICS | June 8, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 18 |
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| REFINANCING | ||||||||
| REFINANCING | 72 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 82 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 70 |
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ANALYSIS: With an Obermatt Safety Rank of 70 (better than 70% compared with alternatives), the company McDonald's has financing practices on the safer side, which mean that their overall debt burden is lower than average. 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 72, meaning the portion of the debt that is about to be refinanced is below average. It has less debt in the refinancing stage than 72% of its competitors. Liquidity is also good at 82, meaning the company generates more profit to service its debt than 82% of its competitors. This indicates that the company is safer when it comes to debt service. However, Leverage is rather large at 18, which means the company has an above-average debt-to-equity ratio. It has more debt than 82% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 70 (better than 70% compared with alternatives), McDonald's has a financing structure that is 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 Below-Average Financial Performance
| COMBINED PERFORMANCE | June 8, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 61 |
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| GROWTH | ||||||||
| GROWTH | 45 |
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| SAFETY | ||||||||
| SAFETY | 82 |
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| COMBINED | ||||||||
| COMBINED | 34 |
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ANALYSIS: With an Obermatt Combined Rank of 34 (worse than 66% compared with investment alternatives), McDonald's (Restaurants, USA) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of McDonald's are a good value (attractively priced) with a consolidated Obermatt Value Rank of 61 (better than 61% of alternatives), are safely financed (Safety Rank of 70, which means low debt burdens), but show below-average growth (Growth Rank of 45). ...read more
RECOMMENDATION: An Obermatt Combined Rank of 34, is a hold recommendation based on McDonald's's financial characteristics. As the company McDonald's's key financial metrics exhibit good value (Obermatt Value Rank of 61) but low growth (Obermatt Growth Rank of 45) while being safely financed (Obermatt Safety Rank of 70), it may be a safer investment because companies with low debt can better withstand times of crises. Yet the good value, better than 61% of comparable companies, may also indicate that the company's future is challenging. If you believe that low growth is temporary or just due to a specific current event, you may conclude that the good value of the stock provides an attractive investment opportunity and the downside is limited due to below-average financing risks. ...read more
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