Are McDonald's Lower Combo Meal Prices a Catalyst for Shares in 2025?

Deciding what to do with McDonald's stock? You're not alone. Whether you are a longtime fan of their iconic fries or you are eyeing their shares for your portfolio, the Golden Arches are always in the conversation. The stock has seen some interesting movements lately, slipping about 3.5% over the past month, but still managing a solid 3.7% gain year-to-date. Looking further back, it is up 37.2% over three years and 55.4% in five years. This highlights that McDonald's is not just a slow-moving dividend play, but a company that has delivered for patient investors.

What is driving these price moves? In the near term, there have been headlines about McDonald’s lowering combo meal prices following discussions with franchisees, as well as its decision to oppose minimum wage carve-outs for tipped workers. Meanwhile, the company is advancing on innovation, planning to "double down" on AI investments by 2027 and testing trendy new beverages aimed at younger consumers. All of these factors shape how investors view its growth and risk profile, and that sentiment is clearly visible in the share price.

The spotlight is now on valuation. Is McDonald's trading at a price that offers a real opportunity for long-term gains? Using a straightforward scorecard across six key value checks, McDonald's passes two, which gives it a value score of 2. Some would say that’s not enough to label it a true bargain, but the real story is often more nuanced than any scorecard can reveal. Next, we will examine the numbers and methods behind that score, and later, a perspective on valuation that goes beyond the checklist approach will be shared.

McDonald's scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: McDonald's Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates the fair value of a company by projecting its future cash flows and discounting them back to today’s dollars. For McDonald’s, this approach leverages both analyst estimates for the coming years as well as longer-term extrapolations.

Currently, McDonald’s generates Free Cash Flow of $7.2 Billion. According to analyst forecasts, this is expected to climb steadily, reaching around $10.8 Billion by 2028. Projections extend through 2035, with incremental growth continuing each year. However, these long-range figures are primarily extrapolated for illustration.

Based on these future cash flow estimates and using a 2 Stage Free Cash Flow to Equity model, the DCF analysis values McDonald’s shares at $228.30. When compared to the current share price, this represents a 32.8% premium, suggesting the stock is overvalued relative to this measure of its intrinsic worth.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for McDonald's.

Our Discounted Cash Flow (DCF) analysis suggests McDonald's may be overvalued by 32.8%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: McDonald's Price vs Earnings

For consistently profitable companies like McDonald's, the Price-to-Earnings (PE) ratio is a go-to metric for investors trying to gauge if a stock is attractively valued. The PE ratio tells you how much investors are willing to pay for each dollar of earnings. It reflects not just past performance, but also future growth expectations and potential risks. Higher growth prospects or lower risk tend to justify a higher PE ratio, while more volatility or lower growth might suggest a lower "normal" multiple.

Currently, McDonald's trades at a PE ratio of 25.8x. This sits slightly above the Hospitality industry average of 24.2x, but well below the peer group’s average of a lofty 61.5x. Rather than relying solely on broad industry or peer comparisons, Simply Wall St's Fair Ratio comes into play, tailoring a “just right” multiple for McDonald’s by factoring in specifics like its earnings growth trajectory, profit margin, risk profile, industry, and size. For McDonald’s, the calculated Fair Ratio is 30.5x. This offers a more individualized benchmark than generic industry multiples.

With McDonald’s current PE ratio just below its Fair Ratio, the stock appears to be trading at about the level warranted by its fundamentals and outlook.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your McDonald's Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is your personalized investment story for a company, where you connect your own expectations about McDonald's future revenue, margins, and fair value to your unique perspective on the business. Instead of simply relying on ratios or analyst targets, Narratives help you outline the key drivers behind the numbers, articulate how you see McDonald’s evolving, and then translate that vision into a dynamic valuation.

Narratives link your outlook to a financial forecast and a fair value, making sense of both the company’s story and the math. They are designed to be intuitive and accessible, available for millions of investors right now through the Community page on Simply Wall St. With Narratives, you can see at a glance if your fair value suggests the stock is a buy, hold, or sell relative to today’s price. Plus, as new news or earnings emerge, Narratives are updated automatically, ensuring your analysis stays relevant.

For example, some investors believe McDonald's international expansion and digital innovation will fuel rapid growth, setting fair values near $373. Others focus on competitive risks and valuation pressures, estimating the company is worth closer to $260. This range underscores how Narratives allow for diverse, personalized conclusions grounded in both story and numbers.

Do you think there's more to the story for McDonald's? Create your own Narrative to let the Community know!

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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