Yahoo Finance When Should You Buy McDonald’s Corporation (NYSE:MCD)?
Today we’re going to take a look at the well-established McDonald’s Corporation (NYSE:MCD). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on McDonald’s’s outlook and valuation to see if the opportunity still exists. Check out our latest analysis for McDonald’s
What is McDonald’s worth?
McDonald’s appears to be overvalued by 62% at the moment, based on my discounted cash flow valuation. The stock is currently priced at US$169.48 on the market compared to my intrinsic value of $104.85. This means that the opportunity to buy McDonald’s at a good price has disappeared! Furthermore, McDonald’s’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from McDonald’s?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 19.53% over the next couple of years, the outlook is positive for McDonald’s. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? MCD’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe MCD should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on MCD for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for MCD, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on McDonald’s. You can find everything you need to know about McDonald’s in the latest infographic research report. If you are no longer interested in McDonald’s, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
