Intrinsic Value McDonald's Corporation (MDO.DE)

• Previous Close: €263.55
• Intrinsic Value: €132.81
• Upside potential: -50%

Stock Valuation Context

Business Model And Market Position

McDonald's Corporation is a global leader in the quick-service restaurant (QSR) industry, operating and franchising over 40,000 restaurants across more than 100 countries. The company generates revenue primarily through company-operated sales, franchise royalties, and licensing fees, with a heavy reliance on its franchise model, which accounts for approximately 93% of its locations. This asset-light approach allows McDonald's to maintain strong margins while expanding its global footprint. The company's core menu features iconic items like the Big Mac, Chicken McNuggets, and French fries, complemented by localized offerings tailored to regional tastes. McDonald's dominates the fast-food sector through its unparalleled brand recognition, economies of scale, and vertically integrated supply chain. Its market position is reinforced by aggressive digital and delivery strategies, including partnerships with third-party platforms and investments in its mobile app and loyalty program. The company's ability to adapt to changing consumer preferences—such as healthier options and plant-based alternatives—while maintaining operational efficiency underscores its competitive moat.

Revenue Profitability And Efficiency

McDonald's reported revenue of €25.92 billion for the period, with net income reaching €8.22 billion, reflecting a robust net margin of approximately 31.7%. The company's operating cash flow stood at €9.45 billion, demonstrating strong cash generation capabilities. Capital expenditures of €2.78 billion were directed toward modernizing stores and enhancing digital infrastructure, aligning with its long-term growth strategy. The franchise-heavy model contributes to high profitability, with franchise margins exceeding 80%.

Earnings Power And Capital Efficiency

Diluted EPS of €11.39 highlights McDonald's earnings power, supported by consistent same-store sales growth and operational leverage. The company's capital efficiency is evident in its ability to generate substantial free cash flow, which funds dividends, share buybacks, and strategic investments. Its return on invested capital (ROIC) remains industry-leading, driven by high franchisee productivity and disciplined capital allocation.

Balance Sheet And Financial Health

McDonald's maintains a solid balance sheet with €1.09 billion in cash and equivalents, though its total debt of €51.95 billion reflects its leveraged capital structure. The company's debt is manageable given its stable cash flows and investment-grade credit rating. Its financial health is further supported by ample liquidity and access to capital markets, ensuring flexibility for growth initiatives and shareholder returns.

Growth Trends And Dividend Policy

McDonald's has consistently delivered mid-single-digit revenue growth, driven by global expansion, menu innovation, and digital adoption. The company prioritizes shareholder returns, with a dividend per share of €6.68 and a history of annual increases. Share repurchases further enhance per-share metrics, underscoring its commitment to capital return programs.

Valuation And Market Expectations

With a market cap of €198.24 billion, McDonald's trades at a premium valuation, reflecting its defensive qualities and growth prospects. The low beta of 0.567 indicates relative stability compared to broader markets. Investors expect sustained performance from its franchise model, digital transformation, and international expansion, particularly in emerging markets.

Strategic Advantages And Outlook

McDonald's strategic advantages include its unparalleled brand equity, scalable franchise system, and innovation in digital and delivery channels. The company is well-positioned to navigate inflationary pressures and shifting consumer trends. Long-term growth will likely hinge on international markets, menu diversification, and technology-driven efficiency gains, reinforcing its status as a QSR leader.

Sources

Company filings, Bloomberg, investor presentations