Exciting times ahead?The longer term view from the 30 analysts covering MCD is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line. From the current net income level of US$5.19B and the final forecast of US$6.58B by 2021, the annual rate of growth for MCD’s earnings is 8.21%. This leads to an EPS of $8.73 in the final year of projections relative to the current EPS of $6.43. Growth in earnings appears to be a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. Margins is currently sitting at 22.75%, which is expected to expand to 31.22% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For McDonald’s, there are three important aspects you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is McDonald’s worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether McDonald’s is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of McDonald’s? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!