Burger King Vs. McDonald’s: Who Is More Leveraged?
- Net Debt-to-EBITDA ratio shows the number of years that a company would require to repay its debt (excluding cash and cash equivalents) at the current rate of profits. EBITDA is the operating profit of a company before interest, taxes, depreciation, and amortization.
- The comparison between the two hamburger chains reveals that Burger King is almost three times more leveraged than McDonald’s.
- The higher net debt to EBITDA ratio at Burger King indicates that the firm’s ability to pay off its debt is worse than that of McDonald’s. Typically, a ratio of 4 or 5 is a reason to ring alarm bells because this shows that the company is less able to handle its debt burden, and thus is less likely t0 take on the additional debt required to grow the business. As such, Burger King’s ratio of 4.7 is very close to the border, and may be a reason to worry.
- Interest coverage ratio shows a company’s ability to fulfill its interest obligations.
- As compared to Burger King, McDonald’s is less burdened by interest expense. The 16.61 ratio indicates that McDonald’s should be able to service its debt expense relatively comfortably.
- In contrast, Burger King’s interest coverage ratio of 3.45 is somewhat close to the red alert level of 1.5. If it doesn’t manage its debt better or grow its operating profit at a higher rate, the company could have trouble.
Have more questions on Restaurant Brands International (NYSE: QSR)? See the links below:
- Can Tim Hortons Challenge Starbucks’ And Dunkin’ Brands’ Duopoly In The U.S.?
- Why Have We Revised Our Price Estimate Of Restaurant Brand International Upwards To $42 Per Share?
- Restaurant Brands International Stays Confident Amid Tepid Q2’16 Sales And Fears Of Restaurant Industry Slump
- Restaurant Brands International Q2 FY’16 Earnings Preview: Emphasis On Expansion To Be The Growth Strategy
- Franchised Restaurants To Contribute More Revenues Than That Of Company-Operated Restaurants For Restaurant Brands International By The Next 3 Years
- How Has Restaurant Brands International’s Revenue And EBITDA Composition Changed Over 2011-2015?
- By What Percentage Have Restaurant Brands International’s Revenues And EBITDA Grown Over The Last Five Years?
- Where Will Restaurant Brands International’s Revenue And EBITDA Growth Come From Over The Next Three Years?
- Restaurant Brands International Q1 FY’16 Earnings Preview: Breakfast Market To Drive Comp Sales
- What Is Restaurant Brands International’s Revenue & EBITDA Breakdown? (Updated After Q1 2016)
- What’s Restaurant Brands International’s Fundamental Value Based On Expected 2016 Results?
Relevant Articles
- Down 6% YTD, Will Restaurant Brands Stock Gain Following Q1 Results?
- Will Q4 Results Help Extend The 20% Gain In Restaurant Brands’ Stock Since Early 2023?
- After A 9% Top-Line Growth In Q2 Will Restaurant Brands Stock Deliver Another Strong Quarter?
- What To Expect From Restaurant Brands’ Stock Past Q2 Results?
- Restaurant Brands Stock to Likely See Little Movement Post Q1
- What’s Next For Restaurant Brands Stock?
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Restaurant Brands International
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)