Top 5 Large-Caps for Jan. 7

Each business day, TheStreet.com Ratings compiles a list of the top five stocks in one of five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap -- based on data from the close of the previous trading session. Today, large-cap stocks are in the spotlight.

These are stocks of companies with market capitalizations of over $10 billion that rank near the top of all stocks rated by our proprietary quantitative model, which looks at more than 62 factors. In addition, the stocks must be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. The stocks are ordered by their potential to appreciate.

Note that no provision is made for off-balance-sheet assets such as unrealized appreciation/depreciation of investments, market value of real estate or contingent liabilities that might affect book value. This could be material for some companies with large underfunded pension plans.

McDonald's(MCD Quote) primarily operates and franchises McDonald's restaurants. We have rated it a buy since March 2004, based on strengths such as its expanding profit margins and growth in net income, revenue and earnings per share.

On Oct. 22, the company reported that global comparable sales growth of 7.1% year over year fueled strong results in the third quarter of fiscal 2008. Revenue increased 6.2% when compared with the prior year's quarter. Although this trailed the industry average of 23.2%, it appears to have led to EPS growth. EPS improved 26.5%, rising from 83 cents in the third quarter of fiscal 2007 to $1.05 in the most recent quarter. Although McDonald's reported earnings have been somewhat volatile recently, we feel that it is poised for EPS growth in the coming year. Net income increased by 11.2% when compared to the same quarter a year ago. In addition, we consider the company's 37.7% gross profit margin to be strong, especially as it has managed to decrease from the same period last year and compares favorably to the industry average of 19%.