Better Bet Than McDonald’s Stock: Pay Less To Get More From DRI, YUMC
DRI, YUMC are MCD’s peers in Restaurants industry that have:
1) Lower valuation (P/EBIT) compared to MCD
2) But higher revenue and operating income growth
This disconnect between valuation and performance could mean that you are better off buying DRI, YUMC stocks vs. MCD
Key Metrics Compared
- Why YUMC, DRI Could Outperform McDonald’s Stock
- YUMC, DRI Look Smarter Buy Than McDonald’s Stock
- Stronger Bet Than McDonald’s Stock: DRI, YUMC Deliver More
- A Decade of Rewards: $81 Bil From McDonald’s Stock
- Better Value & Growth: DRI, YUMC Lead McDonald’s Stock
- DRI, YUMC Look Smarter Buy Than McDonald’s Stock
| Metric | MCD | DRI | YUMC |
|---|---|---|---|
| P/OpInc* | 18.1x | 16.9x | 13.6x |
| LTM OpInc Growth | 2.2% | 5.2% | 13.2% |
| 3Y Avg OpInc Growth | 5.7% | 7.0% | 27.8% |
| LTM Revenue Growth | 1.2% | 5.0% | 2.8% |
| 3Y Avg Revenue Growth | 3.4% | 8.1% | 4.5% |
OpInc = Operating Income, P/EBIT = Price To Operating Income Ratio
McDonald’s (MCD) operates and franchises fast-food restaurants globally, offering burgers, chicken items, salads, desserts, beverages, and more, with over 40,000 locations as of 2021.
This is just one approach to evaluate investments. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
Is The Mismatch In Stock Price Temporary
One way to check if McDonald’s stock is expensive now versus the other tickers would be to see how these metrics compared across companies exactly a year ago. Specifically, if there has been a marked reversal in the trend for McDonald’s in the last 12 months, then there is a chance that the current mismatch is likely to reverse. On the other hand, a persistent underperformance in revenue and operating income growth for McDonald’s would reinforce the conclusion that the stock is expensive compared to its peers, but may not revert soon
Key Metrics Compared 1 Yr Prior
| Metric | MCD | DRI | YUMC |
|---|---|---|---|
| P/OpInc* | 16x | 11.8x | 10.2x |
| LTM OpInc Growth | -0.1% | 5.9% | 5.9% |
| 3Y Avg OpInc Growth | 5.2% | 11.1% | 22.6% |
| LTM Revenue Growth | -0.2% | 5.1% | 3.0% |
| 3Y Avg Revenue Growth | 2.8% | 10.6% | 4.9% |
OpInc = Operating Income
Additional Metrics To Consider
| Metric | MCD | DRI | YUMC |
|---|---|---|---|
| P/S | 8.3x | 2.0x | 1.5x |
| Market Cap (Current) | $ 217.5 Bil | $ 23.6 Bil | $ 16.7 Bil |
| LTM Revenue | $ 26.06 Bil | $ 11.76 Bil | $ 11.33 Bil |
| LTM Opinc | $ 12.02 Bil | $ 1.40 Bil | $ 1.23 Bil |
| LTM Op Margin | 46.1% | 11.9% | 10.9% |
OpInc = Operating Income
Alternate buying based on valuation, while attractive, needs to be evaluated carefully from multiple angles. Such multi-factor analysis is exactly how we construct Trefis portfolio strategies. If you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.