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McDonald's Corporation (MCD) Hit a 52 Week High, Can the Run Continue?
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Have you been paying attention to shares of McDonald's (MCD - Free Report) ? Shares have been on the move with the stock up 2% over the past month. The stock hit a new 52-week high of $299.35 in the previous session. McDonald's has gained 12.2% since the start of the year compared to the 17% move for the Zacks Retail-Wholesale sector and the 12.9% return for the Zacks Retail - Restaurants industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 25, 2023, McDonald's reported EPS of $2.63 versus consensus estimate of $2.31.
For the current fiscal year, McDonald's is expected to post earnings of $11.11 per share on $25.05 billion in revenues. This represents a 10% change in EPS on an 8.05% change in revenues. For the next fiscal year, the company is expected to earn $12.18 per share on $26.82 billion in revenues. This represents a year-over-year change of 9.62% and 7.06%, respectively.
Valuation Metrics
McDonald's may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
McDonald's has a Value Score of D. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 26.6X current fiscal year EPS estimates, which is a premium to the peer industry average of 24.7X. On a trailing cash flow basis, the stock currently trades at 23.1X versus its peer group's average of 14.3X. Additionally, the stock has a PEG ratio of 3.1. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, McDonald's currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if McDonald's fits the bill. Thus, it seems as though McDonald's shares could still be poised for more gains ahead.
How Does MCD Stack Up to the Competition?
Shares of MCD have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Dave & Buster's Entertainment, Inc. (PLAY - Free Report) . PLAY has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of B, and a Momentum Score of A.
Earnings were strong last quarter. Dave & Buster's Entertainment, Inc. beat our consensus estimate by 23.93%, and for the current fiscal year, PLAY is expected to post earnings of $3.60 per share on revenue of $2.3 billion.
Shares of Dave & Buster's Entertainment, Inc. have gained 8.5% over the past month, and currently trade at a forward P/E of 12.88X and a P/CF of 7.3X.
The Retail - Restaurants industry is in the top 17% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MCD and PLAY, even beyond their own solid fundamental situation.
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McDonald's Corporation (MCD) Hit a 52 Week High, Can the Run Continue?
Have you been paying attention to shares of McDonald's (MCD - Free Report) ? Shares have been on the move with the stock up 2% over the past month. The stock hit a new 52-week high of $299.35 in the previous session. McDonald's has gained 12.2% since the start of the year compared to the 17% move for the Zacks Retail-Wholesale sector and the 12.9% return for the Zacks Retail - Restaurants industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 25, 2023, McDonald's reported EPS of $2.63 versus consensus estimate of $2.31.
For the current fiscal year, McDonald's is expected to post earnings of $11.11 per share on $25.05 billion in revenues. This represents a 10% change in EPS on an 8.05% change in revenues. For the next fiscal year, the company is expected to earn $12.18 per share on $26.82 billion in revenues. This represents a year-over-year change of 9.62% and 7.06%, respectively.
Valuation Metrics
McDonald's may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
McDonald's has a Value Score of D. The stock's Growth and Momentum Scores are A and A, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 26.6X current fiscal year EPS estimates, which is a premium to the peer industry average of 24.7X. On a trailing cash flow basis, the stock currently trades at 23.1X versus its peer group's average of 14.3X. Additionally, the stock has a PEG ratio of 3.1. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, McDonald's currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if McDonald's fits the bill. Thus, it seems as though McDonald's shares could still be poised for more gains ahead.
How Does MCD Stack Up to the Competition?
Shares of MCD have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Dave & Buster's Entertainment, Inc. (PLAY - Free Report) . PLAY has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of B, and a Momentum Score of A.
Earnings were strong last quarter. Dave & Buster's Entertainment, Inc. beat our consensus estimate by 23.93%, and for the current fiscal year, PLAY is expected to post earnings of $3.60 per share on revenue of $2.3 billion.
Shares of Dave & Buster's Entertainment, Inc. have gained 8.5% over the past month, and currently trade at a forward P/E of 12.88X and a P/CF of 7.3X.
The Retail - Restaurants industry is in the top 17% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MCD and PLAY, even beyond their own solid fundamental situation.