A Fresh Look at McDonald's (MCD) Valuation as Analysts Weigh Growth and Earnings Momentum

McDonald's (MCD) is making headlines as investors look ahead to its upcoming earnings report. This comes after several strong quarters driven by successful global promotions and steady franchise performance. With another annual dividend increase likely, the fast-food giant continues to attract attention for its consistency and income potential.

See our latest analysis for McDonald's.

McDonald's shares have edged steadily higher this year, with a 5.3% year-to-date share price return and recent momentum boosted by well-received promotions and long-term dividend growth. While the past 12 months delivered a flat total shareholder return, the longer-term picture remains bright. A robust 54% five-year total return highlights McDonald's resilience and investor appeal, even as headlines swirl around the company.

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With analyst sentiment tentatively optimistic, the stage is set for McDonald's latest results to settle a familiar debate: is the current price a fair reflection of its strengths, or is there still room for buyers to benefit from future growth?

Most Popular Narrative: 7.1% Undervalued

Onlookers will notice that the most widely followed narrative sets McDonald's fair value at $331.52, compared to its last close at $308.09. This sets an optimistic tone, suggesting buyers may still see upside if key assumptions play out.

The accelerated rollout of technology initiatives (AI-powered order-taking, kitchen automation, edge computing, and IoT-enabled operations) is poised to materially improve operational efficiencies, reduce labor and equipment downtime costs, and ultimately enhance operating margins and EPS as tech investments mature after 2026.

Read the complete narrative.

What’s behind this bold optimism? Dive inside and see the financial leap this narrative expects. Hint: it’s driven by more than just steady growth. Are you ready to explore the numbers that make analysts so confident in a premium valuation?

Result: Fair Value of $331.52 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent declines in low-income traffic and margin pressure from inflation could derail McDonald's growth trajectory and test analyst confidence in current projections.

Find out about the key risks to this McDonald's narrative.

Another View: DCF Paints a Different Picture

While analyst consensus points to McDonald's being undervalued, our SWS DCF model actually suggests the stock is trading above its fair value, closer to $250. This raises questions about whether market optimism is factoring in more future growth than the underlying cash flow warrants. Could this gap signal a risk beneath the surface?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out McDonald's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own McDonald's Narrative

Feel free to challenge the consensus and uncover your own story. Exploring the data is easy and takes only a few minutes, so why not Do it your way

A great starting point for your McDonald's research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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