McDonald's Stock Analysis: Buy or Sell? | MCD Stock Analysis

In the quarter that ended on June 30th, people spent $ 37 billion on McDonald's products. Now, I've rated McDonald's stock as a buying opportunity, and I wanted to take a look at the company's latest results to see if it still ranks as a buying opportunity in my view. >> I want to thank the Mly Fool for sponsoring this video. Visit f.com/parkev for the 10 best stocks to buy now. The figure I highlighted earlier was the company's global systemwide sales, and that was up 5% year-over-year. But remember, McDonald's operates on a franchisee business model. Roughly 90% of the company's locations are owned by franchises. So, the systemwide sales don't count as revenue for McDonald's, but the company generates revenue as a percentage of those sales, and it also attracts royalty fees, etc. from franchises operating those locations. And one of the things that's worked really well for McDonald's is the loyalty. The app that the company only launched a few years ago. It hasn't even been a decade. And 90-day active loyalty users increased by 13% to nearly 220 million as of the end of the quarter, which was June 30th. This gives McDonald's a lowcost way to connect with customers, to drive sales when they need sales, to inform customers of new promotions, to keep them engaged with McDonald's, and it's worked really well. So, global comparable sales revenue increased by just 1.3% in the most recently completed quarter. That's less than desired, but overall revenue increased by 4% in the recently completed quarter. And if McDonald's can deliver 4% or mid singledigit revenue growth for the foreseeable future, I think McDonald's stock investors would be happy with that. I think McDonald's would deliver great returns to shareholders with 4% 5% revenue growth. And that's assuming that they can generate operating leverage and their operating profit margins and operating profits increase at a rate that's faster than their revenue growth. Typically, McDonald's will deliver operating leverage and they will generate economies in scale. So, 4% revenue growth results in roughly 10% growth at least in earnings per share. However, in the most recently completed quarter, they did not generate that. So, they reported 4% revenue growth, but only 3% growth in operating income. That was a disappointment and that was a deceleration. But still for the full six months so far in 2026 they have generated 7% operating income growth on 6% revenue growth despite the more recently completed quarter being more disappointing than the first quarter of 2026. So one of the reasons why I've been recommending McDonald's stock is because of the relatively cheap valuation. You've rarely had an opportunity to buy McDonald's stock at its current valuations. Right now, it's trading at a forward price to earnings ratio of 19 and a half. That's on the lower end of where this stock has traded for according to this valuation metric going back several years. And there's a few headwinds impacting McDonald's, which I'll talk about a little bit later that's driving the valuation lower. So, at the current market price of $274 per share, McDonald's is trading very close to its 52- week low, which is $261. Now, what you're looking at is my discounted cash flow valuation for McDonald's, where I calculated the fair value for the business, which I updated today at $335. That's well above the current market price. So, whether I measured the stock using a forward price to earnings ratio or using my discounted cash flow model, the stock looks undervalued. And of course, one of the bigger reasons is the advent of these weight loss treatments, the GLP1s, that's reducing people's appetite and an overall shift towards healthier consumer behavior. And of course, McDonald's food is not the healthiest of choices. And so that's causing a little bit of a headwind to McDonald's. Secondly, macroeconomic the restaurant industry overall and macroeconomic conditions more generally have deteriorated in 2026. You've had the consumer impact of higher cost of living. People have less money to spend, right? After they spend money on their rent, their car payment, health care, the things that they really, really need. After they spend money on their essentials, they don't have too much money left over. And that difference is dropping right as we move forward. The cost of living is increasing at a faster pace than people's earnings are increasing. And so they have less and less and less disposable income. And one of the places people cut back on when they have less disposable income is going out to eat, right? You can make burgers at home for your whole family. If you have a family of four, you can make four burgers and with fries and everything and drinks for less than $20 and going out to eat a burger is now approaching $10 depending on which burger you choose and which burger place you go to with after tax, you're paying close to $10 for just one burger. And so people compare that and say, you know what, our budget is tight. We're not going to go out to eat. and the whole restaurant industry faces those headwinds, McDonald's included. So that's been weighing on the company's valuation, but those are the macroeconomic at least is a shorter term issue. I expect that will improve as we go through an economic cycle. The weight loss, the healthier consumer option, that's not going away. Uh I'm glad to see consumer behavior shifting towards healthier options. McDonald's has to do a better job. They flat out have to do a better job offering more healthier options to consumers in addition to the things that people already like like the Big Mac and their fries. But they got to have other healthier options to attract consumers that are looking for those choices at the attractive low prices which McDonald's does extremely well. When you're comparing the cost of feeding your family away from home, like when you're deciding not to cook and you want to eat out, McDonald's is one of the lowest cost options that you can get. It It does that really well, but it needs to do that while also offering healthier choices. But overall, I think this is a great buying opportunity. The innovation that's coming through with technology is helping McDonald's expand the geographic reach of each location. And that's only going to improve. It makes it easier for restaurant operators to manage each location cuz you don't need as many people. You're not uh having to deal with as many people, which is one of the more difficult things when you're operating a restaurant location is human resources. If technology can help improve productivity where you don't need as many people to serve the same amount of customers, that's all gravy for restaurant owners and they'll be interested in adding more locations. So, this is one of my uh favorite stocks to buy right now. In fact, I have McDonald's ranked as one of the top 11 stocks you could