Does McDonald’s Recent Combo Meal Price Cut Signal Room for Growth in 2025?

If you’re scratching your head about what to do with McDonald’s stock right now, you’re not alone. The world’s most iconic burger joint has been a staple in many portfolios, but lately, the ride hasn’t been all Happy Meals and extra fries. Over the past month, shares have slid about 5.0%, and even in the last week, the price dipped another 0.8%. Despite these short-term bumps, McDonald’s is still up 2.5% for the year and a remarkable 48.9% over the last five years. This suggests there is some serious staying power in those golden arches.

So, what’s been moving the needle? In August, McDonald’s announced plans to lower combo meal prices following extensive talks with its U.S. restaurants. The decision aims to keep value-hunting customers coming back, but it also adds a different risk calculus for investors. At the same time, the company is doubling down on AI investments to streamline operations by 2027, while also embracing beverage innovation by testing new products targeted at Gen Z tastes. Add their recent firm stance on worker wage rules, and it’s clear McDonald’s is not a company willing to sit still amid competitive pressures.

With so much in motion, how does McDonald’s stack up on actual valuation? According to our scorecard, McDonald’s is undervalued in 2 out of 6 key valuation checks, giving it a value score of 2. In the sections ahead, we’ll dig into which methods say the stock could be a bargain and which raise a caution flag. Later, I'll share what might be an even sharper lens for figuring out what this titan is truly worth.

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 is a common tool for estimating a company's intrinsic value. It works by projecting all future expected cash flows a business will generate, then discounting those back to their present value using a required rate of return. In essence, this method tries to answer what McDonald's is really worth, based on its ability to generate cash over time.

McDonald's current Free Cash Flow sits at $7.2 Billion. Analysts expect continued growth, with projected Free Cash Flow reaching $10.85 Billion by 2028. After 2028, long-term projections are extrapolated and suggest further moderate increases, with Free Cash Flow estimates rising to roughly $12.80 Billion in 2035. All values are calculated in U.S. dollars.

Using the 2 Stage Free Cash Flow to Equity model, the resulting intrinsic value per share is estimated at $230.80. However, this value is approximately 29.9% below the current share price. This implies that, according to the DCF analysis, McDonald's stock may be overvalued at this time.

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 29.9%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: McDonald's Price vs Earnings

The Price-to-Earnings (PE) ratio is a go-to valuation metric for profitable companies like McDonald's because it quickly tells us how much investors are paying for each dollar of earnings. A higher growth outlook typically justifies a higher PE ratio, while extra risks or slower expected growth generally pull this number down. In other words, the "right" PE ratio depends on a blend of where the company is headed and how certain investors can be about getting there.

McDonald's current PE ratio stands at 25x. For reference, the average PE ratio across the hospitality industry currently sits at 24x, while the average for its direct peers is notably higher at 62x. By those rough benchmarks, McDonald's looks reasonably valued next to its industry and inexpensive next to peers. The peer number is skewed by some outliers and does not always paint the full picture.

This is where Simply Wall St’s Fair Ratio comes in. The Fair Ratio for McDonald's, taking into account earnings growth, margins, risks, industry specifics, and market capitalization, is estimated at 31x. Because this analysis considers more than simple averages, it offers a more personalized view of what McDonald's PE should be, tailored to the business and its situation rather than broad groupings.

Comparing the actual 25x PE with the Fair Ratio of 31x suggests that McDonald's may be trading a bit below what a fair, risk-adjusted PE ratio would imply, indicating there could be some undervaluation here.

Result: UNDERVALUED

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’s introduce you to Narratives. A Narrative is simply the story you believe about a company, brought to life through your personal expectations for key numbers like future revenue, earnings, and profit margins. It joins the “why” behind a business, such as McDonald’s global expansion or digital innovation, to your own financial forecast and the resulting fair value so you can make investment decisions with real context.

Narratives are easy to use and available right now on Simply Wall St’s Community page, where millions of investors build, share, and update their views. This tool lets you compare your Narrative’s fair value with the current share price, helping you quickly see if it makes sense to buy, sell, or hold. As new earnings updates or news arrive, Narratives dynamically refresh so your view always stays current.

Consider McDonald’s: some investors forecast an aggressive international growth story and see fair value as high as $373, while others remain cautious about consumer pressure and set it closer to $260. By building your own Narrative, you decide what you believe “fair value” for McDonald’s should be, and act with greater confidence, whatever the market is doing.

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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