MCD Stock Report

2-Year Price History

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Ockham's Rating

MCD Revenue

As we have often noted, in our valuation methodology, "Cash is King." Well, it goes without saying that if a company cannot produce sales then there is no ability to generate cash flow. By that logic we look very closely at revenue numbers as our second most important factor in valuing a company's stock. We have established reasonable Price to Sales per share ranges based on historical data of the last 10 years. For, MCD the high and low end of the Price to Sales per share ratios are 2.65x and 1.77x respectively.

Notice that MCD's current Price to Sales per share ratio is 2.70x, which is high enough compared with historical norms of MCD to cause some concern. The current Price to Sales per share is near the upper end of the historical range. In our eyes, this is a negative factor because it is more likely that it will return to the normal range than continue rising outside of the range. At current sales per share levels, we would need to see a decline in the Price to Sales ratio of 22% merely to return MCD to its historical average.

MCD Cash Earnings

As the old saying goes, "Cash is King!" However, we prefer to capture a few other items within our analysis to identify "cash earnings". Nevertheless, an analysis of Cash Earnings is absolutely pivotal to assessing a company's value, and currently MCD is below its historical average multiple of cash earnings as calculated by Ockham. Similar to our analysis of sales per share, Ockham looks at the last 10 years of cash earnings levels for MCD to identify where the current high and low price levels have been historically in relation to profit per share. Again, we utilize a weighted average methodology which relies more heavily on recent years of data. This weighted average framework provides us with an average high Price to Cash Earnings ratio per share of 14.16 and a 9.37 low over the same period.

At its current price of $57.45, the Price to Cash Earnings ratio of 11.47 per share for MCD is relatively attractive. At current profitability levels, a drop in share price would only improve our future expectations. Again, Cash Earnings is an incredibly valuable metric, and management at MCD must continue on its generation to improve our overall outlook for the stock.

MCD Dividends

A positive Ockham rating does not require a company to pay out an inviting dividend or a dividend at all. However, we believe dividends provide a useful measure of a company's inherent expectations.

Comparable to our analysis of Sales and Cash Earnings per share, we examine dividend yields from MCD against the historic high and low levels over an available data range. Because MCD has an established history of paying a dividend to shareholders, there is value in comparing recent dividends to historical dividends. In MCD’s case, the estimated annual dividend is $2.00 producing a current dividend yield of 3.48%. The highest dividend yield from MCD in recent history was 4.37% while the lowest dividend yield was 0.50%. MCD’s current dividend yield is therefore significantly higher than its median dividend yield historically. In fact, the current yield is 42.92% above the median which weighs very positively on our analysis of MCD.