Is McDonald’s Stock A Real Bargain?
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McDonald’s (MCD) stock trades at 19.9 times earnings, compared with 23.0 for the median S&P 500 company. The shares lost 17.9% over the past year while the S&P 500 returned 17.1%. Current prices appear to assume that the slowdown in the U.S., McDonald’s largest market, will last. So is McDonald’s a sound business on sale, or a fair price for one whose home market has stalled?
Is McDonald’s Profit Still Growing?
Yes. McDonald’s earned $8.79 billion over the four fiscal quarters through fiscal Q2 2026, up from $8.39 billion a year earlier. Buyers would therefore be paying a low multiple for profit that rose, not for earnings in decline.
McDonald’s kept 45.7% of its revenue as operating profit over those twelve months, compared with 18.5% for the median S&P 500 company. That margin barely moved from a year earlier. The cash is there too. Free cash flow equals 4.4% of McDonald’s market value, exceeding the 3.0% dividend yield.
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McDonald’s Growth Is Coming From Abroad
McDonald’s revenue grew 6.3% over the latest twelve months. This pace topped the 4.6% average for the three twelve-month periods ending in June 2024, 2025 and 2026, which includes the latest period. The latest full-year segment figures, which cover fiscal 2025, show growth abroad outpacing the U.S. Revenue from the International Operated Markets rose 8.0% in fiscal 2025, while U.S. revenue rose just 1.8% to $10.8 billion.
After a solid start to 2026, the U.S. business slowed significantly. Comparable sales at U.S. restaurants grew 0.8% in fiscal Q2 2026. This fell below management’s own expectations, and comparable sales turned slightly negative in July. Management estimates that weak execution of its value offers accounted for about two-thirds of the shortfall in customer traffic. As of July, McDonald’s U.S. diners had not come back.
How McDonald’s Plans To Win Back Diners At Home
McDonald’s is moving marketing dollars behind value offerings such as Extra Value Meals through the second half of 2026. The company also planned to start retraining its more than 2 million restaurant crew, employees and supplier partners on October 5. At its Investor Day on September 23, 2026, McDonald’s laid out plans to raise operating margins and spend billions of dollars on franchisees’ equipment and tech upgrades.
Before the Investor Day, on the fiscal Q2 2026 call in August, management said the plan would require investment across the system. They expected the effort to be meaningfully self-funded by productivity gains in company and franchisee restaurants. This matters because McDonald’s debt stood at $54.6 billion at the end of fiscal Q2 2026, compared with about $0.8 billion in cash. The company also pushed its goal of 50,000 restaurants to 2028 from the end of 2027. On the August call, management said it expected comparable sales growth in its two international segments to speed up in fiscal Q3 2026 from 1.5% and 1.9% in fiscal Q2.
What Is A Buyer At Today’s Price Betting On?
A buyer at today’s price is betting that the U.S. slowdown at McDonald’s is the fixable execution problem management describes, rather than a lasting loss of U.S. diners. On the fiscal Q2 2026 call, management said the company does not have a strategy problem and simply did not execute well enough in the second quarter. So far, McDonald’s profit is still rising on its high margin, while, as of July, its U.S. restaurants had yet to win diners back. McDonald’s U.S. comparable sales growth is the number to watch in its fiscal Q3 2026 report, expected on or around November 4, 2026.
Is Too Much Of Your Wealth Riding On One Stock?
Whether McDonald’s is a bargain will take time to find out. When one position grows into a large part of your wealth, a sharp fall can hurt your whole plan, and selling to spread the money out can bring a large tax bill. Our partner advisory firm offers a free strategy review of ways to protect a concentrated position and unwind it with less tax.
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